Bargaining Power: Kurds on the Rise in Iraq
It's amazing what a difference economic independence can make. Just ask the Kurds.
The Iraqi Kurds have long wrangled with Iraq's central government on topics ranging from sectarian disputes to energy policy. Now, however, the Kurds have boosted their bargaining power with their first unilateral sale of crude oil on the international market, and Kurdistan has new, unilateral pipelines coming online soon. Growing confidence among the Kurds is a big part of the reason the Iraqi central government in Baghdad has come to the table and tentatively agreed to restore relations with Kurdistan.
Last week, the Iraqi central government and authorities of the semi-autonomous Kurdistan Regional Government (KRG) put together a seven-point deal that could see the Kurds resume oil exports to Iraq in return for a revision of the 2013 Iraqi budget, which slashed most of the funds allocated to Kurdistan.
KRG Prime Minister Nechirvan Barzani announced last week that the two sides had made headway in discussions on the issue following over a month of boycotts of the Iraqi parliament by Kurdish deputies over the budget.
(Related Article From OilPrice: OPEC Falling Apart at the Seams)
In January, the KRG halted exports of crude oil through Iraqi-government-controlled pipelines over non-payment of fees by Baghdad (to wit: $4.5 billion). Baghdad has refused to pay arrears for foreign oil companies operating on KRG territory, which the Iraqi central government says is a violation of the country's sovereignty.
Baghdad attempted to hit back at the Kurds by stiffing them in the central budget. The new 2013 budget, passed in March, gave the Kurds only $646 million of the $3.5 billion they requested.
The provisional agreement between the Kurds and the Iraqi central government also attempts to resolve the question of the disputed territories that lie between the two—most notably Kirkuk, which is home to more than 40 percent of Iraq's total oil reserves.
The seven-point agreement promises to redraw the map of this territory, based in part on demographic changes and a census.
(Related Article From OilPrice: Kurds Seize Oil Initiative in Iraq)
It comes as the Kurds deploy troops to the disputed territories, ostensibly to fill in a security vacuum there. Sectarian violence has flared as a result of the spillover of the conflict in Syria. In reality, though the Kurdish peshmerga forces are guarding Kirkuk's oil fields and wells.
What's really happening is that Erbil (the power center of the KRG) sees an opening, as Baghdad is being consumed by the chaos of sectarian violence that is threatening to turn into an all-out Sunni revolt and transform Iraq into a second front in the Syria conflict. Baghdad's position is weakened, while the Kurds are only being strengthened.
Unlike anywhere else in Iraq, Erbil is a center of stability, however corrupt. It is flourishing, and the talk is not of the rising unrest in Iraq, but of the peace deal between KRG benefactor Turkey and the Kurdistan Workers' Party (PKK). What this heralds—at least for KRG President Massoud Barzani and his Kurdistan Democratic Party (KDP)—is an even stronger relationship with Turkey. All of this is moving the KRG toward feasible economic independence.
(Related Article From OilPrice: Saudis Dare US to Play Oil Ball)
What is often left out of this story in the mainstream media level is the clear division between Kurdistan's two key political parties—the KDP and the Patriotic Union of Kurdistan (PUK), led by the Talabani family. While the PUK largely controls disputed Kirkuk and the eastern part of Kurdistan, Barzani's KDP controls the west and the lucrative border crossing with Turkey.
The KDP sees a chance for independence that is economically viable—and growing more so by the day. The PUK's economic interests lie more in keeping Iraq together. So when we talk about Kurdish independence, this is a highly polarized notion, both politically and geographically.