Oil is the backbone of Kurdistan’s economy

Kurdistan. May 10 The New Mail. Oil is the backbone of Kurdistan’s economy.  Kurdistan’s oil pipelines to other countries are crucial. They represent the most significant economic links the region possesses and are fundamental to Kurdistan’s position in the world. Their importance has certainly helped Kurdistan to achieve its current stable position, and to promote its role in the wider world.

 

A flame rises from a pipeline at Tawke oil field near Dahuk, 400 km (245 miles) north of Baghdad May 9, 2009. Iraq's largely autonomous Kurdish region said on Friday it would start exporting oil next month, but the Oil Ministry in Baghdad cast doubt on the plan, denying it had given them permission to use national pipelines. Picture taken May 9, 2009. REUTERS/Azad Lashkari (IRAQ ENERGY POLITICS) - RTXFDTF
A flame rises from a pipeline at Tawke oil field near Dahuk, REUTERS/Azad Lashkar

 

 

 

 

 

 

 

 

 

 

 

 

The pipelines are its connection to that world. They are arteries, reaching out beyond Kurdistan, linking it to places that it would normally be unable to trade with directly. They provide direct economic links in the form of the oil trade, but there are also indirect benefits, with the infrastructure around the oil trade bringing additional revenue into the region and the connections to a large business that result creating a climate for future investment.

It is fair to say that oil is the backbone of Kurdistan’s economy, representing the vast majority of foreign exports, as well as being the source of income that many of its public works are founded on. From schools to government buildings, it is oil revenue that has provided Kurdistan with the opportunity to meet the needs of its people. Yet the oil has done much more than that. It has had social, diplomatic and defence impacts that are at least as important as the economic ones.

It has allowed it seek connections with others who might once have been enemies. The KRG is today able to trade in oil through Turkey despite Turkey’s long history of conflict with the Kurdish people. It might not have erased the past, but it has provided enough common ground on which to forge a future, at least in terms of trade relations.

Yet there might be more important benefits to the relationship that has come out of the oil trade. There was a time when Turkey refused to acknowledge the existence of the Kurds while their language and flag were banned outright. Recently, however, thanks to the trading relationship built up through the oil pipelines, Prime Minister Nechirvan Barzani was welcomed on an official visit to Turkey, where they flew the Kurdish flag in recognition of his arrival.

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Turkish PM Davutoglu meets with KRG PM Nechirvan Barzani at his office in Istanbul, Turkey, photo Reuters

 

 

 

 

 

 

 

 

 

 

 

Oil has also proved to be crucial for Kurdistan’s defence, both in its capacity to pay for some of the arms and armaments on which Kurdistan’s security depends, and because of the role it plays in making Kurdistan’s oilfields worth an international commitment to defending. Oil has allowed the peshmerga to purchase arms and armour they could not otherwise have afforded. More importantly, however, Kurdistan’s oil fields are of sufficient international importance that they make the region worth defending. When ISIS seemed to be on the verge of attacking Irbil, the potential loss of its oil fields galvanised international support in a way that their atrocities elsewhere had not. The importance of Kurdistan’s oil fields both within the region and globally means that its international partners are more likely to act to prevent Kurdistan’s destruction than they otherwise might be.

Going forward, oil will continue to be crucial for Kurdistan. It has become one of the most important oil exporters in the region, and the acceptance of that internationally has helped to raise its profile in its own right, rather than simply as a part of Iraq. The need to discuss oil has given Kurdistan a seat at the international table in the way it has often lacked before, and that voice will allow it to build its position in the future.

That is why it is so dangerous that the Iraqi prime minister has called for Kurdistan to hand over oil revenues to Baghdad, saying that doing so is a necessary precondition of Kurdistan receiving its share of the Iraqi budget. Even if it were possible for Kurdistan to send oil money to Baghdad in the midst of an economic crisis, handing over oil revenues would be an implicit acceptance of Baghdad’s right to control its oil, and that would cut into Kurdistan’s position in the world. Kurdistan’s government has indicated that it might only consider doing so if Baghdad paid the long neglected salaries of some of the workers depending on the money Baghdad owes, but it seems as if neither side is likely to budge on the issue.

In reality, it seems unlikely that Kurdistan will ever give up its oil. To do so would be to give away any hope of independence by removing the economic base for the ensuing country. While it might be possible to temporarily hand over revenues in return for a share of the wider Iraqi budget, it seems unlikely that such an approach can work in the long term. In reality, oil is too much the backbone of the emerging Kurdistan for it to risk giving away any of it. Instead, it seems likely that Kurdistan will continue on the path to independence, fuelled by its oil resources, and connected to the world by crucial pipelines.

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