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What to Do in Iraq? Time to Look to the Kurds


If there was ever a time for Iraq's leaders to grant the Kurds' concessions on oil in return for their political and military support, this is it.

I got an e-mail a few months ago from an old friend, a fellow emerging markets veteran who, after disillusionment with Moscow and a few other outposts, had finally found a congenial, and extremely safe, place to settle with his family. This lovely refuge was called Erbil.

The name was a new one on me, too.  But the weight of Erbil -- or Arbil, an alternative spelling -- in world affairs is rising rapidly. For this city of some 500,000 is the capital of Kurdish Iraq, which has been effectively autonomous since the fall of Saddam Hussein and now is taking big steps towards the full perquisites of a nation state. The United States should help it. The Kurds, a non-Arab Muslim people who have been repressed since time immemorial in Turkey, Syria, and Iraq, are good for business, and historical justice is on their side.

The Sunni Arab guerrillas who made world headlines last week with their invasion of Mosul, Iraq's second biggest city, certainly seem to merit the much overworked term "extremist." A signature for the Islamic State of Iraq and Syria (ISIS), as they call themselves, has become You Tubed beheadings and crucifixions of opponents.  

But the ISIS is not sufficiently divorced from reality to mess with the Kurds, although Erbil is half an hour's drive from Mosul without traffic.  Instead they turned south to consolidate their position among fellow Sunnis and have a shot at menacing Baghdad. Overnight the New York Times reported that the militants had seized the northwestern city of Tal Afar and were claiming responsibility for an unconfirmed massacre of 1,700 captured Shiite Iraqi soldiers. The stout Kurdish militia known as Peshmerga -- "those who face death" in the local tongue -- took advantage of the chaos to seize Kirkuk, the Kurds' traditional capital, while the Kurdish Regional Government (KRG) welcomed refugees from ISIS's barbarity.  

Aside from stability guaranteed by a disciplined armed force, the Iraqi Kurds have oil. Official estimates put the region's reserves at 45 billion barrels, about one-third of the Iraqi total and enough for a top-10 spot globally between Libya and Nigeria. That is to say, a lot of oil for a population just over 5 million. Like my friend, an increasing number of outside oil men are finding Kurdistan more hospitable than Iraq proper, with its epicly corrupt bureaucracy and seismic security situation (although the Iraqi oil fields are concentrated in the solidly Shiite south, where ISIS is unlikely to stray). No less a player than Exxon Mobil (NYSE:XOM) laid down a marker in 2011, winning licenses for six fields in Kurdistan and giving up a major project in southern Iraq when the Baghdad government got annoyed.

Geographically, Kurdistan is well placed to export crude via pipeline to neighboring Turkey, but politics have kept its petrodollars to a dribble. Earlier this year, the KRG finally opened its own pipeline to the Turkish port of Ceyhan, carrying a modest 100,000 barrels per day. The Erbil authorities say they could produce 2 million barrels daily by 2019. That may be exaggerated, but the region could certainly expand production significantly. The immediate stumbling block is Baghdad, which insists on controlling the export infrastructure. Even as ISIS was romping into Mosul, chasing away whole divisions of the Iraqi army with an insurgent force numbered at about 800, Prime Minister Nouri al-Maliki's Iraqi government was suing the KRG before the UN to recapture its oil revenues.

The Sunni resurgence at Baghdad's doorstep should alter Maliki's calculations. If there was ever a time to grant the Kurds' concessions on oil in return for their political and military support, this is it. But Maliki's outstanding trait as a politician seems to be stubbornly defending the interests of his own Shiite community, so the US should make it its business to give him a push. Forging a Baghdad-Erbil alliance that untied the Kurds' hands to exploit their oil riches would be, to recall a famous phrase, not letting this ISIS crisis go to waste.

Alas, the politico-media jabber is instead streaming down its well-accustomed channels. The White House is steaming an aircraft carrier into position and hinting at "air strikes," as if F-16s could stop 800 guerrillas fueled by a mix of ferocity and tribal sympathy. Tony Blair comes out of the woodwork to argue that ISIS "has to be countered hard, with force." US Republicans are sure to screech that we should never have "surrendered" Iraq in the first place. Meanwhile a chance to actually increase Iraq's security -- and more importantly for the outside world, the security of its oil -- by playing the Kurdish card slips though our fingers.

As the veteran dictators who kept the Arab world frozen in time topple or totter one by one, it has become increasingly difficult to tell the good guys from the bad guys over there, to say the least. ISIS grew out of what was supposed to be a good-guy movement, the rebels fighting Bashar al-Assad in Syria. They are reportedly funded by some of America's staunchest regional allies like Saudi Arabia and Qatar. In extremis, the force most likely to stop them is Shiite Iran, the long-time bad guy who just might turn good should ISIS actually breach Baghdad. And so on.

The Kurdish story is not perfect either, morally or geopolitically. Kirkuk, which the Kurds just occupied as the center of their historic homeland, is a multi-ethnic city where vocal populations of Turkmens and Assyrians (yes, Assyrians) have long resisted Kurdish hegemony.  Externally, free Kurdistan needs to manage a delicate relationship with Turkey, which is more than a bit worried that the independent spirit will spill over to its own 11 million restive Kurds.  

Yet relative to other parties at the table, the Kurds have shown they can manage their own affairs and be an important part of the solution among Iraq's multitude of problems. Given stable relations with Baghdad and Ankara, they could also develop into a significant oil province, and one that is open to multinational investors. Washington should be using its power to make this happen.
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