Sharing the Oil Money: How Federalism Could Save Iraq

Sharing the Oil Money: How Federalism Could Save Iraq from another Saddam Hussein

Iraq’s oil revenues are currently distributed in a way that sets the financial foundation for a new dictatorship, according to this report from Niqash, in which an economist explains how federalism, a better tax system and the national oil and gas law could avert this danger. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

In a controversial move, the government of the central Iraqi state of Salahaddin announced last week that it wanted to become a semi-autonomous region of Iraq with relative financial and administrative independence, in the same manner that Iraqi Kurdistan is. Currently the decision is only symbolic: Iraqi provinces need both a public referendum and parliamentary approval in order to attain autonomy and as Iraq’s Prime Minister Nouri al-Maliki is already criticising the decision, whether Salahaddin actually achieves the desired autonomy is up for debate.

From time to time, other parts of Iraq have also called for administrative and financial independence. These include the states of Anbar and Basra. In early 2009, the latter announce that it had failed in its attempt to gather enough signatures to start on a course toward semi-autonomy. What all of these cases have in common though is that both the supporters of independence and its opponents have had their eyes on the assets involved: the oil and gas fields in those areas as well as the potential for the discovery of more oil and gas resources.

The only Iraqi region to have been successful in gaining independence has been Iraqi Kurdistan – and a major part of its ongoing conflict with the central government in Baghdad can be traced back to those same assets: oil, oil exploration rights and oil exports. The ongoing conflict over the city of Kirkuk is part of this equation.

What all of these examples show is that, despite attempts to sell the idea of independent statehood through various political slogans, the essence of conflict over more independent Iraqi states comes down to wealth.

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