Corruption remains one of the biggest challenges. Patronage networks fed by the main political parties — Barzani’s Kurdistan Democratic Party and the ailing former Iraqi President Jalal Talabani’s Patriotic Union of Kurdistan — have spawned a class of nouveau riche whose ostentatious lifestyles breed resentment.
The opaqueness of the KRG’s energy deals, particularly with Turkey, remain another bone of contention. It remains unclear how the proceeds of oil sales are allocated or even how much they are worth. Until recently, these were deposited in an escrow account with Turkey’s state-owned Halk Bank.
Most would conclude that the Kurds’ fiscal blues puts a big damper on their long-cherished dreams for statehood. If anything, it has reinforced the sense among ordinary Kurds that formal ties to Baghdad are more of a hindrance than anything else.
If the KRG were a sovereign state, it would be able to tap international donors such as the United Nations or the World Bank for funds or float its own bonds. “But we can’t,” Bayan said.
Barzani makes no secret of his desire to lead his people to statehood. He has raised the possibility of holding a popular referendum this year. Kurdish leaders acknowledge that their state can only be viable if at least one of the two regional heavyweights, Iran and Turkey, offers its blessings and if the United States comes on board.
Iran, with a restive Kurdish minority of its own remains firmly opposed. But Turkey, which has more Kurds than Iraq, Iran and Syria combined, appears to be shedding its fears. Indeed, by enabling the Kurds to export their oil without Baghdad’s consent, Ankara is helping to shore up their financial independence.
Aydin Selcen, a prominent former diplomat, who opened and headed the first Turkish Consulate in Erbil in 2010, believes Turkey must do more to bail out the KRG. The most effective way of doing so, he argued in an interview with Al-Monitor, would be for the state-owned Turkish Energy Company, which was set up for deals with the KRG, to buy most if not all of the producing assets of the main oil companies operating in the KRG and in Kirkuk.
But the real opportunities lie in Kurdistan’s rich natural gas reserves. These are expected to fully come on stream by 2018 and exported to Turkey, which is desperate to reduce its dependency on Russian gas. Yet, unless the KRG sticks to pledges of radical reform, that income may be squandered as well.
(Bankruptcy image via Shutterstock)