Kurdistan’s Petro-Politics

The US has been pressuring governments and private companies not to buy Kurdish oil, out of fear that oil sales will make it easier for the Kurdistan Regional Government to declare independence from Iraq. But this strategy, Dov Friedman posits, is actually having the opposite of its intended effect:

The U.S.’s logic is clear. KRG oil sales provide the Kurds a financial base with which to stabilize a potential fledging independent state. If the Kurds are unable to sell oil, they will have to parlay with Baghdad to solve the budgetary dispute. However, the U.S. misjudges the Kurdsboth their likely steps after independent oil sales and their response to interference with oil revenues. Distinct Kurdish oil sales have always been more likely to bring the KRG to the Iraqi bargaining table. They seek concessions from the central government, and the threat posed by independent revenue streams may be more valuable than the ability to declare national independence.

First, Kurdistan benefits greatly from its access to the greater Iraqi market.

Kurdish businesses of all sizes are bolstered by a market size of 30 million people, and these businesses would suffer from an independence bid thatat least in the near termslashed the market size by five-sixths. A fledgling independent Kurdistan with a hobbled private sector would rely even more heavily on oil revenuesintensifying the oil-fueled Dutch disease and jeopardizing the nascent country’s economic health.

Second, the Kurds have historicallyand to this daylooked for opportunities to strike bargains with their Arab co-nationalists to the south. … Once in control of Kirkuk’s oil establishments, the KRG initially demanded an increase in its share of the national budget from 17 to 25 percent, to account for increases in the population servedand energy resources controlledby the KRG. Having just taken control of one of the largest, highest quality oil fields in the world, the Kurds spoke not of an independence bid but of renegotiating terms with Baghdad.

Previous Dish on the prospects for Kurdish independence here.