Iraq: the economic and political risks of Kurdistan's referendum

Iraq: the economic and political risks of Kurdistan's referendum

Giorgia Lamaro
The overwhelming vote in favor of Kurdish independence in the recent referendum triggers swift repercussions. Kurdistan's relations with the international community become strained, especially with Turkey, while neighboring countries, which are home to millions of Kurds, each draw their own conclusions

On Monday, September 25, as widely expected, the citizens of the autonomous region of Iraqi Kurdistan voted overwhelmingly in favor of independence from Baghdad in a referendum that holds huge symbolic value and opens some major questions for the future of the whole area. According to the preliminary results, 92.73 percent of those who went to the polls, that is around 2.861 million people, expressed their support for independence.  The data, released by Erbil’s election commission, include the online votes of Iraqi Kurds living outside Iraq and voters in Iraq’s disputed territories of Sinjar, in the Nineveh province, and Kirkuk. The head of Kurdistan’s election commission Handren Mohammed told international reporters that the voting process was "successful", and international observers said it was held without violations. The turnout for the referendum was 72 percent. The final results will have to be approved by the Kurdish Court of Appeal, but the president of the autonomous region Masoud Barzani declared victory a few hours after the vote, without even waiting for the electoral commission’s official announcement of the result. In his statements, President Barzani recalled the persecutions endured by the Kurdish people during Saddam Hussein’s regime and sent a message of openness to the federal government and neighboring countries, calling on all parties to engage in peaceful dialogue.

Geopolitical repercussions in the energy sector

The September 25 referendum is merely consultative and non binding. It has not been recognized by either the Iraqi parliament or the Baghdad government and has been strongly contested by Turkey, Iran and the United States. Its consequences for the future relations of the oil-rich region of Kurdistan with Baghdad and neighboring countries, however, are still hard to predict. The price of oil actually rose in the days following the poll, triggered by concerns about the Kurdistan situation, with Brent peaking at USD 59 per barrel on September 26 and WTI at USD 52 per barrel. Some of the foreign companies working in Kurdistan have decided to bolster security measures in their oil facilities. Gazprom Neft Middle East, a division of Gazprom Neft operating in the region, announced it has increased security measures in its production plants. Director General of Gazprom Neft Middle East Sergei Petrov said in a statement that all units of the Group are operating in the "regime of increased security, [and] are ready for any situation." Petrov also recalled that in 2014, at the height of Islamic State’s threat in the region, the company evacuated all its employees from northern Iraq. Beyond any fears about the security of oil facilities, what causes the greatest concern is the position adopted by the Turkish government which, despite being at loggerheads with the sizable Kurdish community living in Turkey, maintained close economic ties with Erbil until a few months ago. Before the referendum, Turkish President Recep Tayyip Erdogan threatened to shut down the Kirkuk-Ceyhan pipeline that carries oil produced in the oil fields in the autonomous region of Iraqi Kurdistan to Turkey and the European markets. After a phone call with Iraqi Prime Minister Haider al Abadi in the wake of the referendum, Turkish Prime Minister Binali Yildirim announced that henceforth Turkey will only deal with Baghdad’s federal authorities over oil exports. Yildirim, however, did not make it clear how Turkey is going to tackle the matter, given that over 500 thousand barrels of oil per day are carried from the oil fields of both Kurdistan and the region of Kirkuk through the Kirkuk-Ceyhan pipeline. After Islamic State’s advance in northern Iraq in 2014, most of the oil facilities in the Kirkuk area have fallen under the control of Kurdish authorities and Peshmerga forces. It will be not be easy for Turkey to give up its agreements with Erbil, given that it relies on imports for 75 percent of its energy requirements.

The positions of Iraq, Iran and Syria

Meanwhile, Iraqi Prime Minister Haider al-Abadi adopted one of the first "countermeasures" towards the autonomous region of Kurdistan after the referendum, imposing a ban on all flights to and from Erbil. Regional airlines, including Turkish Airlines, Egyptair and Lebanon’s Middle East Airlines, had previously announced that they would halt their flights towards Iraqi Kurdistan. Talking to the international press, the director of Erbil airport Talar Faiq Salih criticized the measure imposed by Baghdad, which, he said, would impact the military campaign against Islamic State in both Iraq and neighboring Syria, and make it more difficult to send aid to displaced people. Iran, for its part, announced the closing of its airspace to and from Iraqi Kurdistan on Sunday, September 24, the day before the referendum, following the failure of diplomatic efforts to stop it from going ahead. Iran is home to between 4 and 7 million Kurds, predominantly Sunni Muslims and mostly concentrated in the provinces of Iranian Kurdistan, West Azerbaijan, Ilam and Khermanshah. The Shiite theocracy in Tehran has always been diffident towards minorities. The Kurdish language is not taught in schools, and Sunni Kurds feel discriminated against on religious grounds. It is thus easy to see why the vote by Iraqi Kurds would raise concerns in this neighboring country, too. An unexpected reaction, by contrast, has come from Syria, where last year the Kurds created their own "autonomous" region, the Democratic Federation of Northern Syria. Syrian Foreign Minister Walid al Muallem said the government is ready to discuss "autonomy" for the country’s Kurdish region. Syria’s Kurds, stated Muallem after the referendum in Iraq, "want a form of autonomy within the framework of the borders of the state," adding that the issue "is negotiable and can be the subject of dialogue" once Islamic State is defeated. In Syria, as in Iraq, Kurdish fighters have played a crucial role in the fight against the jihadist group and don’t want to miss this opportunity to stake their claims.