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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
When Measuring ISIS’s “Resurgence”, Use the Right Standard
When Measuring ISIS’s “Resurgence”, Use the Right Standard

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

An Iraqi fighter with the Popular Mobilisation Forces inspects the site of the Islamic State (IS) group attack, May 3, 2020. AFP/AHMAD AL-RUBAYE

When Measuring ISIS’s “Resurgence”, Use the Right Standard

Memories of the Islamic State’s 2014-2015 “caliphate” peak in Iraq and Syria colour views of its present capacity, leading officials and observers either to exaggerate or understate its threat. In Iraq, the group does pose a danger. Gauging it properly is key to containing it.

On the night of Friday, 1 May, the Islamic State (ISIS) launched one of its most ambitious operations in Iraq in recent memory. Several units of the jihadist group converged on Iraqi paramilitary forces securing a rural section of Salahuddin province, engaging them in an hours-long attack that ended with ten paramilitaries dead. The 1 May assault followed a month in which ISIS had become more direct and aggressive in its attacks on Iraqi security forces.

A military official in the Global Coalition to Defeat ISIS, the U.S.-led multilateral partnership that has supported Iraq’s fight against the group, noted the complexity of the Salahuddin attack and several others that weekend. He also confirmed that the preceding month had seen a postural shift from the group, even if there had not been a qualitative improvement in its equipment and tactics.

Yet he also emphasised how far ISIS remains from the height of its prowess in 2014, when it could marshal large motorised columns to roll across the desert, seize swathes of both Iraq and neighbouring Syria, and declare a “caliphate”. “Are they [ISIS] recruiting anybody?” asked the Coalition official. “No. Are they putting out a cool video that’s getting put on the front page of the Daily Mirror? No. Are they able to raise money from taxes, oil wells, foreign donations – a little bit, but mostly no. … So their strength has to be measured in those terms”.

In its recent flurry of activity, ISIS has demonstrated nothing close to its capability and reach circa 2014 or 2015.

All of which is true. In its recent flurry of activity, ISIS has demonstrated nothing close to its capability and reach circa 2014 or 2015 – or even its potency in the preceding years, during which the group laid the groundwork for its eventual seizure of territorial control.

But ISIS’s “caliphate” apex was also a unique, anomalous moment. And memories of that moment have distorted subsequent analysis of the group’s insurgency in Iraq, years later.

The result is that both hyperbolic claims that ISIS has returned to the sort of operations and capabilities that immediately preceded its 2014 “caliphate” and attempts like the Coalition official’s to tamp down that alarmism are often framed and argued in terms of that 2014-2015 “caliphate” peak. ISIS’s current capabilities end up being measured relative to a historical experience that was shocking and terrible, but also likely an outlier.

Crisis Group itself has warned of ISIS’s “resurgence”. But that resurgence, if it happens, probably will not look like 2014. Meanwhile, using this “caliphate” standard may make it harder to discern changes in the group’s operations that are incremental but still meaningful for assessing the threat posed by its insurgent campaign – changes like the shift over the course of April, which seems to have presaged the genuine and deadly qualitative escalation on 1 May.

ISIS Leans Forward

The 1 May operation was apparently planned and complex. ISIS first attacked local tribal auxiliaries belonging to Iraq’s paramilitary al-Hashd al-Shaabi (Popular Mobilisation) force south of the Salahuddin city of Tikrit. The jihadists assaulted and killed one group of six Hashd fighters, only to hit incoming reinforcements with an improvised explosive device (IED) the group claims it planted in advance, killing three more. Another Hashd fighter was killed in a separate, simultaneous attack. The ISIS units advanced along four axes, according to a Hashd official, who also said some militants approached on skiffs crossing the Tigris.

The new frequency of these direct engagements contrasted with the group’s previous preference for asymmetric attacks.

Throughout April, ISIS had seemingly been aiming more directly at Iraqi security forces. According to its own reporting, as well as diplomats and a military official who spoke to Crisis Group, the jihadist group initiated more head-on firefights with those security forces, as well as more daytime attacks. The new frequency of these direct engagements contrasted with the group’s previous preference for asymmetric attacks on Iraqi security personnel – relying more heavily on means like roadside bombs and sniper attacks – and the steady targeting of rural civilians.

As a Western diplomat from a Coalition member country put it: “They’re bolder, more aggressive. … They use IEDs, as usual. But more and more they engage in firefights, whether with the [Iraqi security forces] or [the Hashd] – and they kill”.

ISIS’s latest, more assertive attacks have been concentrated in a rural belt reaching across Iraq’s centre north, in Kirkuk, Salahuddin and Diyala provinces. The stretch includes territories disputed between Iraq’s central government in Baghdad and the Kurdistan region. Since ISIS’s 2017 territorial defeat in Iraq, its guerrillas have taken shelter in especially rugged terrain in these areas. Over April, the group also seemingly escalated attacks on the western edge of Anbar province, along the Jordanian and Saudi Arabian borders.

“You have some remnants of the organisation, cells, that try to carry out operations here and there – in desert areas, like western Anbar, or on plains, ravines and mountains”, Iraqi defence spokesman Brigadier General Yehia Rasool told Crisis Group. “Areas where the nature of the terrain is difficult, which are hard to totally control”. In Iraq’s disputed territories, the organisation also exploits the stretches of no-man’s land separating federal Iraqi and Kurdish security forces, as well as failures of coordination between them.

ISIS’s April attacks did not mark a qualitative escalation, insofar as they evinced no obvious improvement in the group’s underlying capabilities. The group’s dispersed units used the same uncomplicated tactics they have adopted since 2017 – small guerrilla bands executing one-off attacks with small arms and IEDs.

Using the same means, ISIS units appeared to be making new choices in terms of target selection and timing.

Still, even if the attacks were not qualitatively better or more complex, they did seem qualitatively different. Using the same means, ISIS units appeared to be making new choices in terms of target selection and timing.

On 28 April, ISIS attempted a suicide attack on an intelligence service headquarters in Kirkuk’s provincial capital – an operation with scant precedent since 2017, given how the group has avoided suicide bombings and conserved manpower after losing its territorial control. Security personnel engaged the lone attacker as he approached, and he detonated his explosives before reaching the building. Several men were wounded but none killed. Delivering a single attacker equipped with an explosive belt for a failed attack thus mostly showcased the group’s intentions, not its capabilities.

The group’s coordinated attack on 1 May, however, is different – a real qualitative escalation after the group’s attitudinal change the preceding month.

Unclear Causation

ISIS’s latest attacks are likely an attempt to force Iraqi security forces to retreat into fortified bases and cities, while intimidating local civilians into non-cooperation with the Iraqi state. Such motives would follow a standard insurgent logic, one the group has itself articulated in its publications. In effect, the group has written, government forces would be ceding the countryside by moving into cities and hardened facilities. Then, they “would become encircled in the urban areas they are attempting to secure, which would turn little by little into fortresses”. At that point, ISIS could transform its units from guerrilla bands carrying out limited attacks into “semi-conventional formations that can – with the permission of God Almighty – carry out coordinated, medium-size or even large operations, in terms of their range and the nature of their targets”. But if this logic is fairly clear, why the group has escalated now is less so.

The attacks come after months of tensions and tit-for-tat attacks between the U.S. and Iran-linked Hashd factions.

The attacks come after months of tensions and tit-for-tat attacks between the U.S. and Iran-linked Hashd factions that have disrupted counter-ISIS cooperation between Iraqi security forces and the U.S.-led Coalition. On 3 January, the U.S. killed Iranian general Qassem Soleimani and Hashd chief Abu Mahdi al-Muhandis in a drone strike as the two men left Baghdad airport. Since then, Iraq has been beset by recurrent violence between the U.S. and Iran-linked Hashd factions. In addition, the country has been riven by controversy over whether to expel U.S. forces and end what Iraqi opponents of the U.S. presence call an “occupation”. Over March and April, U.S. and Coalition forces withdrew from a number of forward Iraqi bases, where they were exposed to attack, into a few safer compounds, claiming the move was “long-planned”.

Iraqi counter-ISIS operations have nonetheless continued, and, after an initial interruption in January, so has at least some Coalition support. “We never had a large number of troops [in those bases] anyway”, said the Coalition official. “And in the past week, the Coalition has provided support for Iraqi forces, including drones and airstrikes. We didn’t need infantry sitting in Kirkuk to do that”. Yet it is unclear how the Coalition forces’ withdrawal from these bases – where they worked alongside some of the Iraqi units most directly involved in fighting ISIS – has affected counter-ISIS cooperation and the Coalition’s situational awareness in insurgent hot-spots. Moreover, tensions between the U.S. and Iran’s Iraqi allies have had other effects. According to Western officials, for example, some U.S. surveillance assets that had been used for counter-ISIS operations have been diverted to “force protection” – keeping watch for paramilitary attacks on U.S. soldiers.

ISIS has evidently followed these developments, and in particular the base withdrawals, referencing them in its weekly newsletter for members and sympathisers. It is unclear what conclusions the group has drawn, however, or if they informed its field units’ operational thinking.

COVID-19 does seem to have some impact on Iraqi security forces’ readiness.

ISIS may also be seizing on Iraqi security forces’ distraction by the COVID-19 pandemic. In March, ISIS enjoined its members and sympathisers worldwide to capitalise on their enemies’ preoccupation with coronavirus and to continue carrying out attacks. The withdrawal of foreign Coalition trainers from Iraq because of COVID-19 and a related halt to training Iraqi forces seems unlikely to have had an immediate effect on counter-ISIS efforts. But COVID-19 does seem to have some impact on Iraqi security forces’ readiness. Some have been tasked with enforcing curfews and other public health measures, according to military officials. A second security unit that had been based near the paramilitaries targeted on 1 May was reportedly redeployed to urban areas to help implement COVID-19 measures.

“The army has a number of missions; among them is this humanitarian effort”, said Iraqi defence spokesman Rasool about the security forces’ role in enforcing COVID-19 measures, though he emphasised that counter-ISIS efforts were also continuing.

Iraq has also suffered through a protracted political vacuum, going without a functioning government from December until a new government was formed earlier this month. The country has also faced a deepening economic crisis. ISIS may have also timed a surge of attacks to coincide with the Muslim holy month of Ramadan.

The coincidence of these various factors in Iraq makes it hard to clearly identify a single cause for ISIS’s latest moves. As a Coalition member country diplomat said: “It’s too early to draw conclusions. But it’s clear something is happening”.

An Unlikely 2014 Redux

Still, ISIS’s current insurgent attacks do not compare to the outsized threat the group posed in the past.

ISIS wants to communicate that it still has this capability. But really, its capabilities are low.

As Rasool, the Iraqi defence spokesman, stressed, ISIS is no longer blowing up massive car bombs or seizing territory. Speaking before the 1 May attack, he said the organisation has reverted to its “old style – one-off attacks, here and there, to send a media message, and to raise the morale of the group’s members who may now be lying low. It wants to communicate that it still has this capability. But really, its capabilities are low; they don’t rise to the quality they were previously”.

Indeed, ISIS insurgent activity is limited mostly to the country’s rural periphery. Iraqis who lived through the group’s 2014 rampage, as well as, before that, its years-long campaign of mass-casualty bombings and mafia-style violence in places like Mosul, know that ISIS’s violence is much reduced.

In parts of the countryside, said a Kirkuk-area tribal sheikh, ISIS “is present, and it’s merciless”. But, he added, “It’s not in cities or urban areas. It’s out in the [rural] districts and subdistricts; in the bush, or in ravines and mountains”.

The impulse to discourage residual ISIS scaremongering is understandable, particularly as Iraq has worked to recover from the war to defeat the group and to address the country’s many, accumulated non-ISIS problems. It is all the more reasonable given the at-times melodramatic descriptions of the putative threat. Analysts have often couched warnings of ISIS’s possible resurgence in terms of the group’s imminent return to territorial control, or to the 2013 and 2014 periods that anticipated its “caliphate”.

In the most recent issue of ISIS’s newsletter, the group itself noted the alarmed media coverage of its escalating operations, as part of “the great shock [the group’s] latest attacks had yielded in enemy ranks”. ISIS’s enemies “are comparing the situation today to how things were before [Iraq’s] cities fell into the mujahideen’s hands” in 2014, the newsletter reported.

The awful spectacle of ISIS circa 2014 and 2015 has also helped frame discussions of jihadist insurgents far from Iraq. To take one example, U.S., French and West African officials recently told the Washington Post that “to avoid scrutiny from the West, [West African jihadist] groups are not declaring ‘caliphates’”.

Now, after the years-long, destructive battle to dislodge ISIS, both Iraqis and their international partners are alert to the group’s threat.

But setting aside terminological issues – local ISIS affiliates would not announce a second “caliphate” to rival the one the main branch declared in 2014, which the group still insists is extant and valid – the proto-state that existed in Iraq and Syria is unlikely to reappear.

In 2014, ISIS seized on an exceptional historical circumstance. The Arab world was in epochal flux, as longstanding incumbent regimes had fallen, and national borders seemed suddenly subject to revision. Money, arms and thousands of foreign fighters had poured into Syria’s roiling insurgency, which by then had diminished the Syrian state’s writ to a fraction of the country. ISIS – whose origins lay in neighbouring Iraq – used the non-state void in Syria as an extensive, resource-rich rear base, from which it prepared an Iraqi surge. In Iraq, the group had already infiltrated a mass Sunni mobilisation against the central state, a movement that was encouraged publicly by Sunni states in the region. Too many people – not only in Syria and Iraq, but also in the West – were too slow to recognise ISIS’s threat. By the time the group had swept through large sections of Iraq and Syria in the summer, then doused local municipal buildings with its trademark black paint, it was too late.

Now, after the years-long, destructive battle to dislodge ISIS, both Iraqis and their international partners are alert to the group’s threat. ISIS maintains that its ultimate aim is a return to territorial control and administration, after an extended war of attrition. But while the organisation remains dangerous – in Iraq and elsewhere – it can no longer surprise its enemies in the same way.

All of which is to say that a redux of 2014 – that type of military blitz, the return of the “caliphate”, or renewed ISIS control of more than a handful of peripheral, rural areas – is hard to imagine. The group would evidently like to duplicate its 2014 surge. But the confluence of factors that permitted it is not there and arguably seems unlikely to be there any time soon. Gauging the organisation’s capabilities in those terms, therefore, is not useful.

It is crucial to stay tuned to subtler shifts in ISIS’s activity, below the 2014 threshold.

In Iraq, ISIS’s “resurgence” seems likely to look less like 2014 and the “caliphate,” and more like the group’s 1 May attack in Salahuddin. That prospect might not animate an international audience, the way warnings of another 2014 would. But for Iraqis – particularly in the rural areas most vulnerable to the group’s attacks – that sort of resurgent ISIS would again be terrifying and lethal.

It is thus crucial to stay tuned to subtler shifts in ISIS’s activity, below the 2014 threshold – qualitative “change”, if not necessarily qualitative “escalation”. That is the sort of change that may alert Iraq and its international partners to the need for a course correction.