Arrow Left Arrow Right Camera icon set icon set Ellipsis icon set Facebook Favorite Globe Hamburger List Mail Map Marker Map Microphone Minus PDF Play Print RSS Search Share Trash Twitter Video Camera Youtube
Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit
Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit
Table of Contents
  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.

  • Share
  • Save
  • Print
  • Download PDF Full Report

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

The Perils of a Post-ISIS Iraq

Originally published in Foreign Policy

In Kirkuk, the extremist group's defeat risks rekindling old ethnic and religious conflicts — unless cooler heads prevail.

The Islamic State fighters who occupied Sheikh Burhan Mizher al-Assi’s village in northern Iraq did not content themselves with simply blowing up his home. They also destroyed the tombstones erected above his parents’ buried remains in the local cemetery.

Assi, a respected Arab member of the elected Kirkuk Provincial Council, is now an internally displaced person (IDP) in Kirkuk after the Islamic State overran a good part of the governorate in June 2014. To add insult to injury, the man who led the destruction of the sheikh’s property was a member of his own tribe, the Obeid.

Such traumas have been all too common during the war against the Islamic State. They also highlight a discomfiting fact: In Iraq, the Islamic State is mainly a local problem. The extremist group’s Iraqi contingent has very few foreign fighters and instead reflects the radical turn taken by some in the Sunni Arab community against the existing political order.

The damage that results from incidents such as the one that befell Assi isn’t just on the surface — they are reshaping identities and loyalties in one of Iraq’s most multicultural areas. Many of the same Iraqi Sunni Arabs who once opposed the U.S. occupation and resisted attempts at demographic engineering by Kurdish parties now find themselves as “guests” of those same parties. As newly minted IDPs, they have become more accommodating to Kurdish ambitions and plead for U.S. help in liberating their homes from Islamic State control.

Yet many Kurds remain suspicious of their erstwhile Sunni Arab adversaries, conflating them with the Islamic State and trying to exploit their current misfortune to press for an advantage in long-running ethnic disputes. They thus risk setting the stage for the next round of conflict.

This dynamic is especially visible in Kirkuk, where both city and governorate have been claimed and fought over by Iraq’s central governments and Kurdish political parties for decades. The Iraqi constitution drafted after the U.S. occupation in 2003 specified a set of procedures for settling Kirkuk’s future status — whether it would become an independent region or arrive at some other political arrangement — but its terms have yet to be carried out. Frustrated by this lack of progress, the Kurdish parties have pressed forward, gradually seizing control of Kirkuk’s administration and security. As the Islamic State seized the predominantly Sunni Arab areas to the south and west in June 2014, Kurds entrenched their power in the city and the majority-Kurd areas to its north and east.

The approximately 60 percent of Kirkuk governorate not under Islamic State control plays host to more than 700,000 IDPs. Some originally hail from inside the governorate, but most come from the nearby provinces of Diyala, Nineveh, Salahaddin, and Anbar. The vast majority of these IDPs are Sunni Arabs, displaced from their homes and villages when the Islamic State seized them or in subsequent violent attempts by government forces and associated militias to recapture them. Sometimes a lack of general security prevents these people from returning home; sometimes political actors — Shiite militias or Kurdish Peshmerga — would simply prefer they never return.

Hawija, a mainly Sunni Arab town in the governorate’s agricultural heartland, became a focal point of Iraq’s intersecting Sunni-Shiite and Arab-Kurd conflicts in 2013. Back then, the local population rose up against what it perceived as arbitrary detentions and institutional neglect perpetrated by Prime Minister Nouri al-Maliki’s government. The protests were met with repression — more than 40 civilians were killed in several days of violent confrontations with security forces — turning the town into a poster child for all the ills that would facilitate the Islamic State takeover one year later.

Today, the Islamic State’s territorial gains are being reversed. A campaign to liberate Mosul and its surrounding towns and villages in Nineveh governorate is heating up. But Hawija remains in the extremist group’s grip — even as the area in Kirkuk under its control has been cut off from the group’s strongholds further north and in Syria. As a result, residents are now being starved because they have lost their lifeline to other Islamic State-held areas and the limited trade that came with them.

Liberation, therefore, cannot come a moment too soon for the citizens of Hawija. The big question is: At whose hand? The Iraqi Army is disinclined to get its fingers burned once more in the town and is terribly overstretched as it gears up to retake Mosul. And so the local population and its exiled political representatives are left with an unpalatable choice of militias: either the Iran-backed Popular Mobilization Forces (PMF), which have been known to “cleanse” reconquered Sunni areas wherever Shiites also reside, or the Kurdish Peshmerga, who have been engaged in similar practices involving Arabs.

If it were up to the people of Hawija, it would be neither. They’d rather have a force comprising their own folk — Sunni Arabs from these areas. But the more powerful militias have prevented them from establishing an armed force, so they indulge in desperate calculations. If it’s the Kurds who come in, they are likely to seek revenge for the brutal execution by the Islamic State of captured Peshmerga and to wreak enough destruction that local Arab populations are deterred from ever again attempting to block Kurdish ambitions in Kirkuk governorate. Sunni Arabs also fear the Kurds would seek to detach Arab areas from Kirkuk and bequeath them to the adjacent Salahaddin governorate, which falls under the control of the central government. Kirkuk’s Sunni Arabs vigorously oppose such a step, as it would deprive them of access to their long-established market for agricultural produce and Kirkuk’s oil wealth.

Some Hawijans hope they might get lucky if liberation comes at the hands of the Shiite PMF, because those militias are not interested in permanently replacing Sunnis in an area that has no Shiite population. Moreover, they speculate, their town is not located along the route that Iran’s proxies are accused of seeking to clear between the Iranian and Syrian borders. Yet any military action involving the PMF will not draw U.S. air support, and so the battle with the Islamic State could be protracted and result in severe damage to the town.Destruction, the town’s residents fear, is coming either way.

Of course, the people of Hawija and other Islamic State-controlled areas don’t get to decide who reconquers their towns. The choice will be made for them. And even if the Peshmerga and PMF — mindful of potential international criticism and future war crimes trials (and contrary to past practice) — exercise extreme restraint, Kirkuk’s Sunni Arabs have reason to fear what fate will befall them the day after.

“We were not part of the former regime, nor do we belong to this terrorist network,” Assi told me. “Yet before June 10 [the day in 2014 when Mosul fell to the Islamic State, also known as ISIS] we were accused of being Saddamists and after that of being ISIS.”

The fact is that he and most of his compatriots are neither. But the accusation sticks, and it enjoys a certain logic — many in the Islamic State’s leadership and cadres are officers of the former regime’s security forces.

How a victor treats the losers shapes the battles to come. Since no overarching military strategy in Iraq guides how Islamic State-held areas should be retaken, or by whom, each party in the anti-Islamic State fight pursues its own aims. That these aims often consist in imposing collective punishment on Sunni Arabs, sometimes with brutal means, is an alarming prospect: To cast an entire community as sharing the intolerant and murderous ideology of a few among them is to ensure that the few extremists will become many. The future of groups such as the Islamic State and al Qaeda looks bright as a result, despite any territorial losses they may soon suffer — or even because of it, as their obligation to govern when they hold territory has proved to be a burden they are ill-equipped to meet.

If the defeat of the Islamic State is going to lead to real progress, instead of merely introducing the next stage of the conflict, Iraq needs to establish locally recruited stabilization forces in newly liberated Arab areas. The argument that such a force’s members could turn around and join the Islamic State themselves doesn’t wash; after all, there is a real threat that the entire population could join such radical groups while chafing under the rule of the PMF or Peshmerga. In 2014, that’s precisely what happened when the Shiite-dominated Iraqi Army — deemed by locals to be an inimical force spearheading a “foreign” occupation — tried to control, rather than protect, Mosul’s population.

Given the diversity of Kirkuk, keeping the peace was always going to be harder than winning the war. The governorate’s many communities are already desperately straining to keep the fabric of their shared society from unraveling at the hands of outside actors with chauvinist mindsets and predatory goals.

Najmaldin Karim, a retired neurosurgeon from Maryland who was elected as the area’s governor by the Kirkuk Provincial Council in 2011, has emerged as the unlikely champion of maintaining Kirkuk’s multicultural society. Karim is a longtime member of the very Kurdish movement that has traditionally sought to secure Kirkuk for the Kurds — preferably with as few Arabs in it as possible. But his experience governing this complex area over the past five years, he told me recently, has taught him that the Kurds simply cannot impose their will on others. Karim believes there is a better way to settle whether or not Kirkuk should officially be Kurdish than forcing the governorate into the Kurdish region via a controversial referendum, which would leave a deeply polarized society in its wake. Kirkuk “should be an independent region within Iraq for an interim period of five or 10 years,” he told me.

At the end of that period, Karim hopes Kirkuk’s people will have achieved a measure of mutual trust. They would then be allowed to freely choose where they want their home to be: under Baghdad, under the Kurdish capital of Erbil, or as a stand-alone region with special status and powers. Moreover, he said, Hawija “should become a governorate inside the Kirkuk region, with its own local government and budget” — in other words, maintaining its important administrative and economic links to a Kurdish-dominated Kirkuk.

The governor is floating this option with the full knowledge that, as an independent region, Kirkuk could finally benefit from the wealth of its oil resources. As it stands now, Baghdad and Erbil have deprived the governorate of oil revenues by making profitable deals over Kirkukis’ heads. Somewhat incongruously, the prime minister of the Kurdish region, Nechirvan Barzani, supports the Kirkuk governor in his quest. But both he and Karim insist that Kirkuk would need to be considered at least symbolically as “Kurdistani land,” the way Kurds consider Kurdish areas outside Iraq also “Kurdistani.” Moreover, the governor insists that any future special arrangement for Kirkuk would have to be approved by the Kurdish region’s parliament, which could turn out to be a significant obstacle.

Karim’s position has put him at sharp odds with his own party, the Patriotic Union of Kurdistan (PUK), whose enraged members have threatened him with expulsion. But the PUK is weak, having lost its leader, Jalal Talabani, to illness, and convulsed by internal power struggles. The Kirkuk governor, on the other hand, rightly senses that he has the support of the local population — including its Kurds, who eye the Kurdish parties’ inept and corrupt rule in the region next door with great wariness.

The moment, therefore, is now. As hopeless as the Middle East may sometimes seem, leaders with a pragmatic vision still stand a chance of charting a more peaceful, inclusive way forward. These leaders deserve the international community’s support, as they hold the key to making sure that the Islamic State’s defeat does not simply mark the beginning of a new set of ethnic and religious wars.