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
How to Mitigate the Risks of Iraqi Kurdistan's Referendum
How to Mitigate the Risks of Iraqi Kurdistan's Referendum

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

Iraqi Kurds fly Kurdish flags during an event to urge people to vote in the upcoming independence referendum in Erbil, the capital of the autonomous Kurdish region of northern Iraq, on 15 September 2017. AFP/Safin Hamed

How to Mitigate the Risks of Iraqi Kurdistan's Referendum

A century-long quest for an independent Kurdistan has encouraged Iraqi Kurds to exploit Iraq’s ongoing crises and schedule a referendum on 25 September 2017. But the referendum is more a reflection of Iraq’s disorder than the Kurds’ readiness for statehood, and the vote’s outcome could exacerbate internal and regional tensions.

On 25 September, barring a last-minute postponement, the Iraqi Kurdistan region will hold an independence referendum. Voters will be asked whether they want “the Kurdistan region and the Kurdish areas outside the region’s administration to become an independent state”. The referendum cannot turn Kurdistan into an independent state, regardless of turnout and outcome, because the vote is merely consultative and legally non-binding. Still, the situation presents serious risks, both if the referendum is held and if the price paid to delay it is too high.

On the ground, the day after the referendum likely will look very much like the day before. Iraqi Kurdistan’s legal status will not change, and Kurdish officials probably will retain their posts in the central government in Baghdad, including Iraqi President Fuad Masoum. Motivations for holding the referendum have more to do with internal Kurdish politics and longer-term relations with Baghdad than with immediate national Kurdish aspirations.

For those driving the referendum, namely the president of the Kurdistan region Masoud Barzani and his party, the Kurdistan Democratic Party (KDP), the most immediate objective is not so much to move quickly toward a declaration of independence, but rather to shore up their own political fortunes within Iraqi Kurdistan and its chief city of Erbil. By adopting an assertive nationalist stance, they hope to silence dissent and force opponents to fall in line. Moreover, by extending the referendum to so-called “disputed territories”, a term that defines areas outside the Kurdistan region over which Baghdad and Erbil advance competing claims, the Kurdish leadership aims to strengthen its case for annexing these areas, provided they achieve a resounding yes-vote there.

[T]he referendum is less a reflection of steady, historical progress toward a Kurdish state than of the crises surrounding Iraq.

But political consequences of the vote, intended and unintended, nonetheless could be profound. Once the Islamic State of Iraq and the Levant (ISIS) is defeated, key aspects of Iraq’s power structure once more will be up for re-negotiation. This includes the question of de-centralisation of authority, the organisation and deployment of security forces, the internal balance of power within the Shiite majority and the state of U.S.-Iran competition for influence in the country. By calling the referendum, Barzani is tossing a stone into an already troubled pond.

Old Actors, New Realities

The impact already is visible. Iraqi Prime Minister Hayder Abadi, who thus far had urged accommodation with Erbil, has felt compelled to move toward a more hard-line position. His government has declared the referendum non-constitutional and, despite lacking the legal authority to do so, the Iraqi parliament voted to depose the governor of Kirkuk, a staunch referendum proponent from an area that is especially contested and volatile. Kurdish lawmakers walked out of the session, giving a taste of how the referendum issue may quickly lead to a breakdown of the political process. Abadi is under pressure from Shiite factions close to Iran who could well use the vote to undermine his leadership, posing as the real defenders of Iraqi unity against Kurdish claims. That may help them win over Sunnis living in the disputed areas, but it also could provoke clashes between the armed factions they control and the KDP peshmerga during or after the vote.

There are regional consequences too. Turkey and Iran, both neighbours of Iraqi Kurdistan, have voiced strong opposition to the referendum and warned of dire consequences. For now however, their actions do not seem to be truly aimed at preventing the vote. Ankara and Tehran appear confident that they possess sufficient leverage over leading figures in the KDP and its rival, the Patriotic Union of Kurdistan (PUK), to prevent Iraqi Kurdistan from becoming a fully independent state, irrespective of the vote’s outcome. These Kurdish politicians rely on Turkey and Iran for support, and their dependency will only increase if the referendum provokes an escalation with Baghdad.

Turkey and Iran appear to be waiting to see the effects of the referendum on Iraqi and regional politics to become clearer before making more decisive moves. If, by pushing through the referendum despite strong international opposition, the KDP ends up increasingly isolated, Turkey may seek to exploit the vulnerability of its Kurdish partner to consolidate its foothold in Dohuk and the Ninewa plain, in north-western Iraq. This area is of strategic importance to Ankara because it borders eastern Syria, now dominated by a movement it regards as a dangerous foe, the Democratic Union Party (PYD). This is the Syrian affiliate of the Kurdistan Workers’ Party (PKK), which has fought a three-decade long insurgency against Ankara.

A postponement of the referendum would be the best case scenario, but not at any price.

For its part, Iran may see the referendum as an opportunity to strengthen its position in Baghdad and north-eastern Iraq. Deteriorating relations between Erbil and Baghdad almost certainly would strengthen the Iran-affiliated Shiite factions at Abadi’s and his government’s expense. Tehran also could seek to bolster its Iraqi allies’ influence and leverage over Sunni Arabs who live in the disputed territories and fear Kurdish encroachment, as well as over those PUK members who oppose KDP policies.

Postponement Scenarios

In this context, voices urging Barzani to at least postpone the vote have been loud, clear and eclectic. The assortment of countries includes the U.S., its Western allies, Turkey and Iran, as well as the UN. Barzani has responded by saying he could only delay the referendum if the Kurds were to receive international guarantees that independence negotiations with Baghdad will begin. This almost certainly is a bridge too far even for his closest Western partners. At present, talks are ongoing regarding whether Barzani might accept some lesser, vaguer version allowing him to walk back without losing face while avoiding the provocation of Baghdad.

A postponement of the referendum would be the best case scenario, but not at any price. In their desperation to halt the referendum, international actors – the U.S. prime among them – should tread carefully and avoid paying a price they may come to regret later. Some commitments make sense, such as support for immediate resumption of Erbil-Baghdad negotiations on the full range of issues that divide them. Others would be more fraught, such as any commitment affecting the status of Kirkuk or the disputed territories, or blind support for a referendum to be held by a certain date if talks with Baghdad fail, regardless of whether that referendum is to be conducted in Kirkuk or the disputed territories. In other words, kicking the can down the road makes sense, but not in any direction. Otherwise, the cost of postponement could well turn out to be heftier in the long run than the cost of the referendum itself.

If the referendum proceeds as planned, tensions are likely to rise along with the temptation to penalise Erbil.

Some guidelines should be followed under both scenarios of postponement or non- postponement. If the vote is delayed, the time gained should be used for active mediation by Iraq’s and the Kurds’ partners to de-escalate the situation and press Baghdad and Erbil to negotiate in good faith modifications to the legal framework governing their relations.

If the referendum proceeds as planned, tensions are likely to rise along with the temptation to penalise Erbil. But the smarter course for Baghdad, as well as regional and international actors, would be to downplay the event and virtually ignore it. Unless Barzani takes the next, far more perilous step of seeking to move unilaterally toward independence, the referendum’s value will diminish over time as nothing on the ground will change and nor will the status of the Kurdistan region. Handled properly as essentially a non-event, the referendum might not have overly damaging consequences.

Effective Self-reliance

For Kurds, this could well come as a bitter disappointment. Many read their history as a struggle following a linear path toward statehood. In reality, the national Kurdish struggle in Iraq has been less linear than uneven, a function of the status of the central state. Whenever the regime in Baghdad has been threatened, it has either brutally repressed its Kurdish peripheries or largely withdrawn from these areas, allowing Kurdish parties to perform basic governance and local security functions while resisting their attempts to gain full autonomy. This occurred after the defeat of Saddam Hussein in the 1991 Gulf War and after his ouster in 2003. Today’s developments reflect the weakening of the central state in the face of ISIS.

In this sense, the referendum is less a reflection of steady, historical progress toward a Kurdish state than of the crises surrounding Iraq. It is less a demonstration that a Kurdish state can stand on its own than a by-product of the Iraqi state’s current weakness and of a region in turmoil. Regardless of their future status, the priority for Iraqi Kurds should be to put their own house in order rather than seeking to exploit surrounding regional disorder, to which they would then inevitably be vulnerable.

In short, the Kurdish political parties that led the national struggle over the last century now face the challenge of transferring their power and authority to Kurdish institutions. The key lies in renewing the leadership of the two historical Kurdish parties, the KDP and PUK, to empower a new generation of Kurdish leaders who, their party affiliation aside, can prioritise nurturing a professional bureaucracy and security forces. By doing so, they could turn the Kurdish region into a more effective, self-reliant entity, which would serve them well regardless of any future dispensation on legal status. In the same spirit, they also should avoid triggering conflict with Baghdad and Iraq’s non-Kurdish communities. This applies especially to the question of the boundary separating the Kurdish region from the rest of Iraq. The status of the “disputed territories” must be negotiated as it cannot be imposed by either side. Equally important, Kurdish leaders should propose a vision for Iraqi Kurdistan which all political movements and non-Kurdish minorities alike can share.

A compact, formatted PDF of this commentary can be downloaded here.