Baghdad and Erbil have a long way to go to mend fences

Although revenue-sharing grievances may have been temporarily satisfied, more than oil is in dispute.
Sunday 09/12/2018
A long way to go. Iraqi Prime Minister Adel Abdul-Mahdi (R) and Kurdish leader Masoud Barzani in Baghdad, last November.(Prime Minister’s Media Office)
A long way to go. Iraqi Prime Minister Adel Abdul-Mahdi (R) and Kurdish leader Masoud Barzani in Baghdad, last November.(Prime Minister’s Media Office)

Thorny disputes surrounding control of Kirkuk oil exports returned to the news after Iraq’s central government and the Kurdistan Regional Government (KRG) reached an initial oil deal. Optimism with which the deal was generally met was dimmed by the political impasse that confronts Iraqi Prime Minister Adel Abdul-Mahdi against the backdrop of another failure to vote on vacant ministries.

Details of the deal have not been finalised but Iraq resumed crude oil exports from its northern Kirkuk oil fields in mid-November, promising, Iraq’s Oil Ministry said, to boost production to 50,000-100,000 barrels per day and compensate Iraq for revenue losses incurred owing to the year-long halt triggered by the Kurdistan independence referendum.

Debates have been raging offstage but may have remained dormant in the absence of US pressure to cushion potential shocks in the global market as its sanctions against Iran take effect. Their effect has reverberated into Iraq, disrupting commercial relations between the neighbouring countries while exposing Baghdad’s entrenched dependence on Iranian energy supplies.

Washington, adamant to keep Iraq’s oil pumping, granted Baghdad a waiver on specified goods sanctioned by the United States but issued only scant details. As all sides adjust to weather sanctions, sour relations between Baghdad and Erbil may have been sweetened with an oil deal but far more is needed to mend fences.

In a consistent fashion, a chorus of international powers has endorsed the long-awaited move, overlooking perhaps that additional production will not immediately add to Iraq’s total exports until production between Iraq’s southern and northern oilfields is balanced out, as Oil Ministry spokesman Asim Jihad told Reuters.

Despite the sustained recovery of oil output, Iraq’s government is drowning in a sea of economic troubles — reeling from the effects of the war against the Islamic State, rising debt, a ballooning budget deficit and systemic financial corruption in all its myriad forms. In the face of those challenges, fruits of the Baghdad-KRG deal have a chance of ripening only when present conditions are overcome.

Political power remains concentrated in the hands of the same political blocs and factions. While a step in the right direction, the agreement falls far short of the wider settlement needed to soothe mutual distrust after Baghdad’s military seizure of Kirkuk. The violent take-back signalled not only a stern reminder of where power lies. The September 2017 vote on independence cost Kurdish leaders almost all the fortunes amassed after 2003.

While the New Generation, an opposition Kurdish party, welcomed the deal it also cast doubt over its transparency, requesting full disclosure of its contents from the government. As vocal opponents of what the party described as the Kurdish Democratic Party’s monopoly of the presidency, Rudaw reported, the New Generation is apprehensive of another blowback that would strike not Kurdish politicians but “punish” the Kurdish people.

The transparent and accountable use of oil revenues by Baghdad is an expectation many — particularly local Kurdish actors — fear the central government will not fulfil. Outstanding political disputes, including the KRG’s budget slash, if skirted around, will be sure to limit progress.

Although revenue-sharing grievances may have been temporarily satisfied, more than oil is in dispute. A deal as important as that reached requires wider reforms and economic diversification to inform a wider strategy. Iraq’s reliance on oil as its lifeline will only add to the fragility of future federal budgets, the effect of which will equally cripple the KRG’s expenditures.

Uninspiring praise of the deal by the Abdul-Mahdi-headed state and Western allies offers no assurances to Iraq’s Kurdish partners in the political process. In the same way, the deal represents not a new beginning but an attempt to reset damage caused over the past year.

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