Kurdistan: Business as Usual


Kurdistan Region (KR) President Masoud Barzani last week concluded his visit to the World Economic Forum in Davos, Switzerland, meeting the prime ministers of Holland and Georgia, and the foreign ministers of France, Turkey and Sweden.

Discussions focused on increasing the KR’s bilateral relations with the international community in light of the region’s growing role in the geopolitics and security of the region, as well as its increasing status as a player in the global energy market.  The KR has engaged extensively with the international community in recent years, in its efforts to increase foreign direct investment (FDI) and secure backing from the international community to protect its geostrategic interests amid the deteriorating state of affairs in both Iraq and the broader Middle East.

The KR has also lobbied the international community to garner support for its long-standing disputes with the Baghdad federal government over its expanding energy market and oil and gas exports. In the past week, Baghdad hired an American law firm to target any buyer of what it considers illegally exported Kurdish crude oil.

The new KRG pipeline, completed last month, gifts the KR with an independent export capacity that could dramatically increase its leverage over the Baghdad government, prompting the federal government to, therefore, threaten the KRG with a withdrawal of its share of the national budget.

The KR is likely to press ahead with large-scale exports via its pipeline and invite bids from the international markets. Whilst any resolution to the hydrocarbons dispute is unlikely to materialise until after the April 2014 parliamentary elections and the formation of the next government – which itself may be a long, drawn-out process – there are a number of important underlying dynamics that suggest the KR is likely to expand and build on its energy market and export capacity.

Firstly, the KR has forged a strong relationship with Turkey based around mutual geostrategic and economic needs, and it is against the backdrop of this relationship that the KRG’s energy sector is developed. Whilst Turkey has been apprehensive toward any enhancement of Kudish autonomy in the region, the Turkey-KRG relationship is long-standing both in political and commercial terms and pre-dates the post-2003.

During the 1990s, despite Turkey’s hardline position on the Kurds, Ankara had a strong working relationship with the Kurdistan Democratic Party (KDP), one that was based around political cooperation, particularly when the KDP was embroiled in an intense rivalry with the Patriotic Union of Kurdistan (PUK), backed by Iran, anti-PKK (Kurdistan Workers’ Party) cooperation, cross-border trade and the smuggling of oil.

Turkish officials privately state they have given up on Baghdad, in the sense that the government there is too far into the Iranian orbit of influence. Whilst Ankara also backs important Sunni-dominated groups, it also sees the Kurds and the KR as an important buffer against Iranian influence. Syria and the emergence of an autonomous Kurdish region there means that Ankara will be increasingly dependent on Iraq’s Kurds, both as important stabilisers in Syria as well as counter-weights against the PKK and its Syrian-Kurdish sister group the PYD (Democratic Union Party), which now constitutes the de-facto Kurdish government in Syrian Kurdistan

Secondly, is important to note the fluid state of Baghdad politics. At the moment there is an absence of a unified position vis-à-vis the KRG energy sector, unlike, for example, the issue of Kirkuk, which most of Iraq’s political forces remain united on, in terms of ensuring the oil-rich provinces does not fall under KRG control.

Whilst Deputy-Prime Minister Shahristani is a staunch opponent of KRG hydrocarbons exports, Prime Minister Maliki, for example, is yet to make his position clear and in the past has indicated he could grant the Kurds concessions in the oil and gas sector. The past has also seen Maliki and Shahristani come out with contradictory statements.

The Kurds are also likely to remain important players in Baghdad, meaning that Maliki and other major players will need their support, particularly in the coming months as national elections take place once again, thereby giving the Kurds important bargaining power over issues like hydrocarbons.

The matter is predominantly one of economics. With the support of regional states like Turkey, differences between Baghdad and Erbil could be reconciled. Baghdad could plausibly receive re-assurances from Turkey that increased KRG hydrocarbons independence will not threaten the Iraqi state’s authority and territorial integrity.

Fellow, Iraq Energy Institute

Ranj Alaaldin is Visiting Scholar at Columbia University and a Fellow at the Iraq Energy Institute.