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December 7, 2010 Kurdish concessions in Baghdad

Foreign Policy - By Denise Natali  

The Obama administration may view the recent Iraqi power-sharing agreement as a milestone toward creating a ‘unity' government in Baghdad, yet the real litmus test of Iraq's political viability will come when key legislation is presented to the parliament. Two of the most challenging issues for Baghdad-Arbil relations involve territory and oil -- resolving disputed boundaries and passing a national hydrocarbons law. Although the Kurds are pressed to determine the administrative status of the oil-rich province of Kirkuk, nearly all Arab groups -- Sunni and Shia alike -- remain adamantly against such a proposal. Given current trends in Iraq and the Kurdistan Region, the Kurdish Coalition would do best to nuance its highly-charged nationalist agenda and shift its focus from intractable land claims to Baghdad-approved petroleum deals. The region's long-term political and economic prosperity rests on such a compromise. 

The Kurdistan Regional Government (KRG) will need to make political concessions because the power-sharing arrangement in Iraq is a façade. The Kurds are not kingmakers or even equal participants, but rather a politically expedient swing vote for the two key Iraq political groups: Nuri al-Maliki's State of Law Party and Ayad Allawi's Iraqqiya. Even though the Kurdish leader, Jalal Talabani retained the presidency position and has been able to use his charismatic personality to give the role more substance, it is still a ceremonial post. The Kurdish Coalition may secure one of the key ministries in Baghdad; however, it will not have control of the crux of political power -- the premiership, security forces, or the Council of Ministers. 

Nor does the Kurdistan Coalition have any real ally in Baghdad. Maliki may have expressed support for Kurdish nationalist demands during the transition period; however, he is likely to withdraw from his promises as he consolidates power, much the way previous Iraqi leaders have done during regime changes. Iraqiyya also is likely to frustrate Kurdish territorial demands. The speaker of the parliament, Usama al-Nujaifi, has a reputation for challenging Kurdish nationalist interests and has opposed the idea of resolving the Kirkuk issue (Article 140). 

The Kurds also have new challenges at the societal level. Nearly all non-Kurdish communities across Iraq have become increasingly concerned, if not hostile, to what they perceive as an over-reaching of Kurdish rights and discrimination of Arabs in the northern region. Their collective response has been to reassure that Kirkuk is an integral part of Iraq and that it will not become administratively attached to the Kurdistan Region. This is why, despite Kurdish influence in Baghdad, no real progress has been made on key Kurdish nationalist issues since 2005. The census has been delayed, Article 140 is defunct, and the Kurds must now address the findings of the Committee to Review the Iraqi Constitution, which seeks to revise those articles that empower the regions. 

Indeed, the Kurds face important obstacles in the petroleum sector as well. Even though the KRG has signed dozens of oil deals with international companies and optimistically projects one million barrels daily within five years, the central government does not recognize the contracts. 

Consequently, the oil companies are still unable to export their crude to international markets and have not been fully paid for production. Additionally, despite the larger companies that have recently entered the Kurdish market, the Kurdistan region is likely to face increasing competition from southern Iraq, particularly as the central government attempts to reactive its role in OPEC, develop the mega-fields in Basra, and repair its oil infrastructure, with the hopes of expanding output from 2.6 million to more than 12.5 million in seven years. 

Even if Baghdad cannot effectively raise production to the levels it predicts, it would still have control of the Iraqi oil sector, including markets in the Kurdish north. Regional states seeking to profit from Iraqi oil, particularly Turkey, are looking toward Baghdad and not Arbil as the main source of revenue generation. Turkey's Energy Minister recently confirmed that foreign companies will need the central government's approval to sign oil and gas deals. Not surprisingly, despite improved relations between Ankara and Arbil, Turkey recently re-extended its pipeline agreement with Baghdad, indirectly bypassing the Kurdistan region. 

Still, the Kurdish elites may have a better chance of negotiating a hydrocarbons law than resolving the Kirkuk issue. In fact, slight progress has been made on the oil conundrum, particularly as the focus shifts from ‘rights to exploration' to ‘transparency of contracts.' In his recent visit to the Iraqi Kurdistan Parliament (IKP), soon-to-be ex-Iraqi Oil Minister Ali Sharistani stated that Baghdad would recognize Kurdish oil contracts only if they were all presented openly to the IKP for approval. Further, the central government has included in its draft 2011 budget a line item for oil exports from the Kurdistan Region, although a relatively small amount. The demand for transparency also has become a mantra for the Goran opposition movement, which has recently withdrawn from the Kurdish Coalition and also demands full public disclosure of all KRG-signed oil deals. 

The idea of disclosing oil contracts may challenge the secretive nature of the KRG's Ministry of Natural Resources, a one-man show run by Ashti Hawrami. It also may do little to resolve the long-standing political distrust that runs deep between Arbil and Baghdad or the historical legacies of Kirkuk that shape Kurdish identity, which is tied to the land. Yet, given the new role of oil in driving the Kurdistan region's development and the absence of support from key Sunni and Shia Arab groups for Kurdish control of Kirkuk, the KRG may have little choice but to substitute emotional nationalism for political pragmatism. This option may be the best possible way to realize any political and economic gains in the years ahead. 

Denise Natali is the Research Centers Director at the American University of Iraq, Sulaimani and author of The Kurdish-Quasi State: Development and Dependency in Post-Gulf War Iraq (Syracuse: Syracuse University Press, 2010). 

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