The war agains the Islamic State concealed the Kurds' political and economic weaknesses. The loss of Kirkuk has made them impossible to ignore.
Iraqi Kurdistan’s referendum on independence has made an already bad situation for the Kurds far worse. Instead of enhancing the Kurds’ political leverage and autonomy, it has squandered international goodwill toward them, antagonized Baghdad and its neighbors, and deepened economic risks and societal fissures. It has also spurred the loss of control over important territories and resources. Iraqi security forces have reasserted authority over Kirkuk and its oil assets, other “disputed territories,” and Iraqi border crossings after a negotiated withdrawal of Peshmerga forces.
The Kurdistan Regional Government (KRG) now finds itself hemmed in politically and economically. Although the KRG has offered to “freeze” the referendum results in response to the political fallout and in order to forestall the advances of Iraqi forces into Kurdish-controlled territory, the Iraqi government is demanding full cancellation, although both sides are engaged in negotiations. The fallout from the referendum also promises to reorder the KRG’s internal politics; President Masoud Barzani has announced that he will step down from his post on November 1.
But the referendum was the catalyst and not the cause of the KRG’s current crisis. The KRG leadership has promoted a narrative about the region being a secular democracy with a booming economy and cohesive military force — but, in reality, the landlocked region has long been economically unstable, institutionally weak, and politically divided.
The KRG leadership’s first mistake was to focus heavily on garnering international support for its ambitious state-building project, rather than getting buy-in from Iraqis. Instead of drawing non-Kurds into its “Kurdistani” territories as equal citizens, the KRG discriminated against them. During a visit to northern Iraq days before the independence referendum, one Arab businessman told me how “even in business we are not equal” and complained about additional taxes he had to pay to move goods within the Kurdistan region. Assyrians reacted angrily to land confiscations by the ruling Kurdistan Democratic Party (KDP) and the replacement of their local leaders by KDP officials — a process that they say aims to “erase” them from the Nineveh Plains. Many Yazidis still harbor resentment for having been abandoned by the KDP to the Islamic State in 2014.
As a result, non-Kurdish Iraqis were overwhelmingly opposed to a Kurdish state, particularly one that included the oil-rich province of Kirkuk. One prominent Arab tribal leader told me, days before the referendum, that only 5 in 100 Arabs in Kirkuk would accept KRG dominance over the area. Another Arab leader told me frankly that he would never treat the outcome as legitimate: “It’s not done.… We will get [Kirkuk] back.”
All UsersEven if the independence referendum hadn’t stirred domestic and regional opposition, the absence of a sufficient KRG revenue stream and a unified military command structure would have undermined its ability to hold and secure the territories it gained during the war against the Islamic State. (The KRG’s territory expanded by 40 percent during the military campaign.) The region’s rapid economic development from 2008 to 2012 was largely financed by Iraq’s oil wealth and not a self-sustaining Kurdish economy. The KRG’s decision in 2014 to circumvent Baghdad with “independent” oil sales, together with the fall in oil prices and the costs of the military campaign against the Islamic State, reinforced its economic vulnerability. Although the KRG has cut spending and raised taxes, it failed to ever effectively reckon with its financial and political problems.
Meanwhile, Kurdish military victories relied heavily on external backing — specifically, coalition air power — rather than the KRG’s own institutional strength. Control over the KRG’s security forces, including the Peshmerga, has long been divided between the two main political parties across the region’s three provinces.
These divisions became apparent after the referendum, when some leaders from the Patriotic Union of Kurdistan (PUK), the other main Kurdish party, negotiated a deal with Baghdad and withdrew their Peshmerga troops from Kirkuk without fully informing officials in the ruling KDP party or others within the PUK. It also explains why various factions are now accusing each other of being traitors and “selling out Kirkuk.”
The spectacular loss of Kirkuk, along with its oil fields and assets, and a number of smaller fields in Ninewah province, now promises to deepen the KRG’s financial hole. These losses have thus far reduced the Kurdistan region’s oil production and exports from about 600,000 to about 280,000 barrels per day, taking about 55 percent of the KRG’s oil expert revenue with it. They also come at a time of declining prospects for the KRG’s energy sector: The price of oil has dipped precipitously, and international oil companies (IOCs) have pulled out of 19 exploration blocks inside the region since 2014.
The financial fallout has ended any hope the Kurds had of creating an autonomous and self-sustaining economy separate from Baghdad. These straitened conditions will make it even more difficult for the KRG to pay its civil servant salaries — which have not been fully paid in two years — its more than $20 billion in debt, IOC operating costs, and oil traders. The much-hyped energy deals that the KRG signed with Turkey and the Russian oil company Rosneft may continue — but these foreign investments, particularly after the referendum, are likely to come at the expense of Kurdish control over its own energy market and pricing mechanisms. Baghdad’s closure of international airspace in the Kurdistan region, the cancellation of some regional flights, and threats of border closures from Turkey and Iran — if continued — can only add to the economic morass.
Kurdish leaders are also increasingly under pressure to implement political reforms. The ruling KDP and the PUK together dominate the region’s political and economic affairs and have maintained a power-sharing pact since the first KRG was established in 1992, despite bouts of civil war and tensions. Just recently key officials from both parties called to extend the Kurdistan Parliament’s term for eight months and to postpone elections once again – further assuring their political control.
Local opposition to these parties and the KRG was evident during the referendum: While strongholds of the ruling KDP in Dohuk and parts of Irbil had an 80 to 95 percent “yes” vote, parts of Sulaimaniyah province saw a turnout that dipped as low as 50 percent. These divisions have only deepened since the referendum and its fallout. Even though some Kurds blame foreign governments for the failed independence bid, the vast majority feel cheated by their own leaders in the KDP and PUK.
Power struggles have also been reinforced within and between the political parties, that extend beyond traditional KDP-PUK rivalries. The recent violence in the Iraqi Kurdistan Parliament after Barzani’s “resignation” statement, and ongoing tensions among groups, underlines the fragility of political stability inside the Kurdistan region. Sustained armed conflict is unlikely, although a media war and outbreaks of violence may continue, sporadically.
Opposition groups, independents, and a new reformist party led by former KRG Prime Minister Barham Salih have called for a “transitional government” to help resolve the KRG’s political and economic crises. But even if Barzani vacates his office, there’s no reason to expect the downfall of the House of Barzani or the House of Talabani — the two families behind the KDP and PUK, respectively — anytime soon. The KDP has institutional roots in Iraq since the 1940s, and the Barzani family’s patronage networks run deep. Barzani will retain influence in a “political leadership council” while his son Masrour will remain as head of the KDP security apparatus, and his nephew Nechirvan Barzani will remain as prime minister.
The KRG leadership seems poised to draw precisely the wrong lesson from the havoc wrought by the referendum. Instead of admitting their strategic miscalculations, Barzani and other Kurdish leaders have denied responsibility for the referendum fiasco and its fallout. This group can be counted on to continue playing the victim card, blaming “traitors” for their institutional deficiencies, and harping on outside threats, including Iran and its militias, rather than devoting attention to their internal problems and institutional reform.
Even then, the fundamental features of the Kurdistan region will remain unchanged. It will still be landlocked, economically dependent, bound to Baghdad, Turkey and Iran, and politically divided. These weaknesses will become increasingly apparent as Iraq’s central government gains leverage and credibility across the country and the region, and Iraqi nationalism continues to grow in salience among the public.
Under these conditions, the KRG has little choice but to negotiate with the Iraqi government and regional states to survive, just as it has done for decades. The difference now that the disastrous referendum has been held is that instead of negotiating from a position of strength, the KRG must now deal with Baghdad from a position of weakness.