Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit

Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit


http://www.crisisgroup.org/en/publication-type/media-releases/2012/mena/iraq-and-the-kurds-the-high-stakes-hydrocarbons-gambit.aspx?utm_source=iraqemail&utm_medium=mr&utm_campaign=mremail




Bagdad/Erbil/Washington/Brussels
19 Apr 2012

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.

Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit , the latest International Crisis Group report, examines growing tensions between Iraq’s federal government and the Kurdistan regional government (KRG) over oil and gas wealth and disputed territories in the north. The most recent flare-up highlights that the two sides have not only failed to resolve their differences, but in striking out on unilateral paths, might also have made a solution more remote than ever.

“Each side has its own narrative, accumulated grievances and strong sense of entitlement”, says Joost Hiltermann, Crisis Group’s Middle East Deputy Program Director. “Time is running out as unilateral, mutually harmful moves push relations to breaking point, with hydrocarbons-driven stakes and emotions so high that conflict looks more promising to them than accommodation and compromise”.

Iraq’s Arabs and Kurds have spent 90 years in unhappy cohabitation. This month, tensions escalated when the KRG suspended its supply of oil for export through the national pipeline, claiming Baghdad had failed to fully reimburse producing companies. The federal government responded by threatening to deduct what the sale of oil would have generated from the Kurds’ annual budget allocation, potentially halving it.

As Kurds await the moment they can remove the shackles of an overbearing and at times highly repressive central state, reversing a legacy of discrimination and economic neglect, they are also creating an escape route should relations with Baghdad sour beyond repair. In so doing, they aggravate matters, convincing the federal government they seek independence and to take with them disputed territory they claim as historically part of a notional Kurdistan that appears to be immensely rich in oil and gas. Perhaps most worrying to Baghdad, Kurdish leaders have attracted international firms to exploit suspected hydrocarbons wealth and signed contracts for acreage across the Green Line that divides the Kurdish region from the rest of Iraq. The latest (and largest) to play this is game was ExxonMobil, which in October signed a contract for six blocs, two of which are in disputed territories.

It is late already, but the best way forward is a deal between Baghdad and Erbil centred on a federal hydrocarbons law and compromise on disputed territories. International actors – the UN with its technical expertise, the U.S. given its unique responsibility and strategic interest in maintaining stability – should launch a new initiative to bring the two back to the table. As the Kurds look to Turkey as a potential outlet for their oil without Baghdad’s permission, Ankara should reaffirm its commitment to a unified Iraq and press both sides to agree to a federal hydrocarbons law.

“The Kurds are banking on a regional game-changer that might persuade Ankara to risk its relations with Baghdad”, says Robert Malley, Crisis Group’s Middle East and North Africa Program Director. “But such scenarios might not unfold and, for a multitude of reasons, one must hope they do not. While it will be difficult to reach a deal, both sides should move rapidly in that direction, as the alternatives would surely be far worse”.