Oil Conflict and Kurdish Independence

Morgan Bazilian, Peri-Khan Aqrawi-Whitcomb, Paasha Mahdavi, and Cyril Widdershoven examine the similaritires and differences between an independent Kurdistan and South Sudan.

Independence

The Iraqi’ Kurds voted this week in an historic referendum for their independence and freedom. Kurds were first promised a nations state by the victorious Allies in the fallout of WWI, and Kurdistan was drawn into the Treaty of Sevres in 1920. Dreams of an independent Kurdistan were dashed, however, when Kemal Ataturk defied western powers to create modern Turkey, and the Treaty of Lausanne left the Kurds one of the world’s largest ethnic groups without a country of their own in 1923. We wrote on this in the spring, noting: “Since its foundation in 1992—born out of the no-fly zone enforced by the U.S. military following Iraqi Baathist genocide against its Kurdish citizens—the Kurdistan Region of Iraq has been a stabilizing factor in the region. Not once in history has there been a Kurdish attack on Iraqi civilians in Baghdad or the rest of Iraq.” For scale, the Kurdistan region in Iraq has a population of about five million people, while the Turkish Kurds number about three times that, and a further roughly eight million live in Iran and Syria. Feisal al-Istrabadi, former Iraqi ambassador to the UN, said that Turkey will need “Solomonic” wisdom to deal with their Kurdish population given this referendum.

Independence referenda are a hallmark and a test of both democracy and the rule of law. They have taken place all over the world from Scotland, to Eritrea, to East Timor, to Kosovo, to South Sudan in the last two decades. Catalans are to vote on independence from Spain in late September of this year. Still, in an aggressively worded press release, the U.S. State Department stated: “The United States strongly opposes the Iraqi Kurdistan Regional Government’s (KRG) referendum on independence.”  It goes on to note that the U.S. is not alone in this opinion, and in fact similar statements by the UN, UK and EU followed within 24 hours.  At the same time, Baghdad, Teheran and Ankara, called the referendum results void and announced military, economic and political sanctions on the Kurdistan Region of Iraq (KRI). Starting with the closure of the airspace, and essentially halting all commercial trade. KRG is likely the only Iraqi power able to withstand an incorporation into a Tehran led Shia-influence sphere. It comes as no surprise then that Iran is strongly opposed to the referendum, and has flexed its muscles this week with military drills near the Iraqi border. Despite these threats, Erbil has repeatedly assured its neighbors and international partners that the referendum and its outcome will pose no security threat to their nations, nor weaken the common goal on defeating ISIS. A testimony to this was the launch of an important joint US-Iraqi military operation in Hawija, with Peshmerga participating despite the harsh tone from Baghdad. 

While the U.S. has announced that the historical relationship with the Kurds won’t be affected by the recent vote, it appears to be doing little in to help deescalate the threats coming towards Erbil from Iran, Turkey and Iraq. Apart from Senator Chuck Schumer, who introduced a bill to the senate to support Kurdish independence, very few government figures have come out to support the Kurds or call on its neighbors to refrain from hostilities. Meanwhile, the Kurdish call for a referendum is not only based on its ethnicity but also on the growing marginalization of non-Shia groups in Iraqi society and power structures. President Barzani stressed that Kurds are not building a nation state exclusively for Kurds, but a Kurdistan founded on the principle of ethnic and religious diversity.  Washington and Brussels should take note that even during the IS/Daesh onslaught in Iraq, the KRG region has been the only one without a disintegration of its civil and legal structures. This despite taking in 1.8 million internally displaced persons (IDPs) and refugees in two years, with an average of 80,000 IDPs entering the KRI per month in 2014. This population swell came at a time of severe economic sanctions from Baghdad, fighting a frontline war with ISIS, and low oil prices.

Oil and Conflict

The U.S. press release does not mention oil, but viewing the complex issues in the region where the wider Kurdish population lives (from Iran, Iraq, Syria, and Turkey) without some acknowledgement of the issues around oil is naïve.  On the day of the referendum, oil prices had hit a two-year high, with markets perhaps reacting to the Turkish threat to halt pipeline flows from KRI. Meanwhile, much of the focus of tension is around the city of Kirkuk, which sits in the middle of an oil and natural gas-rich land. The pressures on these issues range from relationships with all the countries in the region and their supporters from the United States to Russia. The role of oil in conflicts and wars is not new. The more recent manifestation of non-state actors in the oil game come from ISIS. But it’s more than oil in this case; there is also natural gas.

The scale of the oil in play in the Iraqi Kurdish region is significant. The KRG claims that the region’s reserve could be as high as 45 billion barrels. Still, only about 600,000 barrels are currently being produced. That is a bit more than 10% of Iraq’s total production. Most of that is piped through to Turkey, creating a clear focus of negotiations. The fields near Kirkuk pump more than half that amount.  Kirkuk has always had a Kurdish history, but Saddam’s Arabization of Kirkuk, by transporting vast groups of Arabs to the city and surrounding region, is still a widely-supported policy by some Iraqi parties.

Russia’s oil company Rosneft is planning to build a pipeline to bring Kurdish gas to Turkey and eventually to Europe. How far this Russian business interest will interfere with regional aspirations of the three main adversaries­—Russia, Iran, and Turkey—is still unclear, despite recent visit of Putin to Ankara. The role of hydrocarbon reserves is one of the main drivers for the current animosity between Baghdad and Erbil. Indeed, this mistrust was at the heart of the Kurdish Regional Oil and Gas Law passed in 2007, which effectively granted KRG the right to award its own petroleum production sharing contracts. Erbil also doesn’t trust its other partners, as Turkey and Iran are largely unwilling to support the Kurdish cause, with the exception of minor oil-gas or military linked strategic deals. For Ankara and Tehran, a free Kurdistan would increase the security risks of existing bilateral and multilateral gas and oil pipelines originating in Iran or the Caucasus. An independent Kurdistan also would block, at least in the midterm, the possibility of bringing southern Iraqi oil and gas to the Turkish energy hub.

The clear necessity on focusing on the peaceful and well-planned arrangements for the treatment of oil and gas production and transmission needs to be at the center of the negotiations post-referendum, under any scenario. The wider geopolitics are on clear display in this case, given the extremely complex borders, relationship and history.  Oil (and gas) issues have been shown to be a catalyst not only for regional arms races, but also for the disintegration of the rule of law. has proven to be particularly vulnerable with its sole national export to be oil.  According to the NRGI Resource Governance Index, Iraq scores poorly when it comes to transparency and good management of revenues and production. All of this said, it appears that, in the five days after the referendum, “…553K barrels of KRG oil departed daily from the Turkish port of Ceyhan for Croatia, Italy & Israel.” In other words, normal activity.

The analogies to the birth of the world’s newest country, South Sudan, may be instructive. There are some similar issues related to the oil resource and the infrastructure needed to get to market. Of course, that country is now in ruins after prolonged violence. The position of the KRG is different. In contrast to South Sudan, where before its independence all oil and gas projects were managed by (Arab) North Sudan or the Chinese, the KRG is already in control of most operations. It sets its own production agreements with operators under the 2007 law and has signed deals with oil majors like ExxonMobil. In fact, under now Secretary of State Rex Tillerson, Exxon became the first international major to enter the Kurdistan region. The KRG will also likely be able, even if borders are being closed, to transport its oil and gas via other means.

Few places in the world sit in a more delicate balance of conflict than the Kurdish population. Their future independence and freedom is a clear goal of their people. The role of the international powers in a region of proxy wars, religious conflict, arms accumulation, and petro-dollars needs to be considered with considerable humility. History has myriad examples of the reverse causing tremendous suffering.  Calls for such level-headed thinking and calm are emerging, and should be carefully considered and respected. This referendum is not a final phase, but a next step towards freedom.  The case of South Sudan provides a stark warning against nation-building in oil-rich regions without thoughtfully discussing issues of production and infrastructure. As Larry Diamond wrote in 2016, the world has witnessed a decline in democracy. Political freedom and liberties, like the right to vote for independence, need to be protected, not attacked. All parties involved also should put an emphasis on mitigating the influence of outside power players, such as Iran and Turkey. The latter two are currently not objective participants but have their own underlying strategies. Some of the mistakes made in 2003 could now be repaired, as stability and safety can sometimes emerge out of a divorce.

Morgan Bazilian is a Fellow at Columbia University's Center for Global Energy Policy, Visiting Professor at The Royal Institute of Technology of Sweden, Fellow at the Center for Strategic and International Studies, and Research Associate at Cambridge University's Energy Policy Research Group.

Peri-Khan Aqrawi-Whitcomb is a specialist in sustainable development policies and political affairs with a focus on Iraq and the Kurdistan Region. She advises the international public and private sector on matters regarding the ongoing socio-political crisis in Iraq and Syria. In 2014 she contributed in building the Kurdistan Regional Government’s first crisis coordination and disaster preparedness centre as Director of Information Management. Previous to that she worked at the United Nations Industrial Development Organization (UNIDO), amongst other things serving as an energy adviser to help launch the UN Secretary-General Ban-Ki-Moon’s Sustainable Energy for All initiative. In the past, she has also acted as a special adviser to the Kurdistan Regional Government’s Minister of Natural Resources, with previous experience in the oil & gas sector, such as working for the Organization of Petroleum Exporting Countries (OPEC).With an undergraduate degree in Economics and International Management from the University of Bonn, she completed her Masters in Advanced International Studies at the Diplomatic Academy in Vienna.

Paasha Mahdavi is an Assistant Professor of Public Policy and the Director of the M.S. in Data Science for Public Policy program at Georgetown University. He is currently writing a book on the relationship between petroleum and governance as mediated by oil-related institutions. Selected other projects include: determinants and consequences of gasoline subsidies around the world; political impacts of oil-to-cash transfers in Alaska; statistical network analysis of oil elites in Nigeria; and transnational prosecutions of oil-related corruption. Dr. Mahdavi holds an M.S. in statistics and a Ph.D. in political science from UCLA.

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle East and energy sectors in the Netherlands, the United Kingdom, and the United States.Dr.Widdershoven earned his post graduate degrees at King’s College, University of London, Department of War Studies, and an MA in Middle East Studies at the University of Nijmegen, the Netherlands. The main focus of his work has been on geopolitical risks, terrorism, fundamentalism and military/defense related issues in the MENA region. At the same time, due to consulting work and advisory, he has become involved in the oil, gas and energy sectors in the region and Africa. He held several senior publishing positions in leading energy publications such as Afroil, Middle East Oil and Gas, and North Africa Oil and Gas Magazine Cairo, and he continues to oversee the Mediterranean Energy Political Risk Consultancy. Dr. Widdershoven worked on M&A operations in Egypt, Libya, Sudan, and Iran, he studied the pipeline operations in Libya, Algeria, Nigeria and Turkey, and he assessed risk for institutional investors and banks in Libya, Egypt, Saudi Arabia, Oman and Iraq, all while advising the Dutch government and international organizations on related issues.Dr Cyril Widdershoven is owner of Dutch consultancy VEROCY.

Image Credit: jan Sefti Via Flickr (CC BY-SA 2.0)