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Kurdish–Iraqi oil dispute hurting Erbil | ASHARQ AL-AWSAT English Archive 2005 -2017
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A vendor displays material used for traditional Kurdish costumes at a market on February 23, 2014 in Erbil, the capital of the autonomous Kurdish region of northern Iraq. (AFP Photo/Safin Hamed)

A vendor displays material used for traditional Kurdish costumes at a market on February 23, 2014 in Erbil, the capital of the autonomous Kurdish region of northern Iraq. (AFP Photo/Safin Hamed)

A vendor displays material used for traditional Kurdish costumes at a market on February 23, 2014 in Erbil, the capital of the autonomous Kurdish region of northern Iraq. (AFP Photo/Safin Hamed)

Erbil, Asharq Al-Awsat—As tensions rise between the Kurdistan Regional Government (KRG) and Baghdad over Erbil’s decision to export oil independently of the Iraqi government, the Kurdistan region and its residents are feeling the full brunt of the dispute.

The Iraqi government considers the export of Kurdish oil independently of its state-owned oil company as “smuggling.” So when the KRG built a standalone pipeline to Turkey that began delivering crude in January and signed a number of contracts with major oil companies in preparation for its own oil export activities, Baghdad cut off the region’s 17-percent share of this year’s Iraqi budget—that is, 17 billion US dollars—and began to delay or reduce payment of wages of all government employees in Kurdistan.

With more than a fifth of Kurdistan’s 5-million-strong population currently on the government payroll, and with Baghdad forking out all of the 840 billion Iraqi dinars (722 million US dollars) that make up these wages every month, the dispute is hurting the pockets of ordinary people on the street, and not just the KRG.

Erbil resident Jia Hassan’s husband is a government employee. She told Asharq Al-Awsat the crisis had greatly affected their living conditions and social life. “I am a housewife and my husband is a clerk,” she said. “We have four children and rely totally on my husband’s salary.”

She added: “Months have passed and all we hear from politicians is that a solution is close—but where is the solution? What have we done to deserve to live like this? My husband started looking for another job to support us. Both parties must end their differences as soon as possible.”

Speaking to Asharq Al-Awsat, Mohamed Jabbar, another Erbil resident, held the federal government responsible for the problem. “The government in Baghdad has not changed and has imposed an economic siege on us,” he said. “Now, Prime Minister Nuri Al-Maliki implements the same policies as those who came before him. Today he cuts our budget and tomorrow he will mobilize his forces against us like the late Iraqi dictator Saddam Hussein did—so what is the solution? We are coming up to Ramadan and we have not received our salaries for the month of May.”

Jabbar has not paid his rent for months because of the shortage in funds. “I live in a rented house. What am I going to say to the landlord? Every month I tell him things will get better soon, but to no avail,” he lamented.

Kurdistan’s famous markets have also been affected by the crisis. Once vibrant and thronging with shoppers, now only a trickle of people pass through the souks of Erbil, Suleimaniyah and Dahuk. Zuhair Ahmed, an Erbil shopkeeper, told Asharq Al-Awsat that since the start of the crisis sales had “dropped markedly and the market has slowed down.”

The KRG previously stressed that it had tried over the last six months to reach agreement with Baghdad, but that Maliki’s government was not interested in resolving the dispute. As KRG Prime Minister Nechervan Barzani said in a news conference held at the Kurdistan parliament last week: “How can we agree a solution with a man who has such a mentality? . . . Who gave one person the right to stop the salaries of the people? He tells the Kurds to do whatever they like, because they are not part of Iraq.”

The rift is also threatening to harm a major source of income for the region: tourism. Erbil has been named the Arab Tourism Capital for 2014, with a number of cultural and tourist activities scheduled throughout the year to mark the occasion and attract people from the region and beyond to the city’s relatively relaxed atmosphere and historic monuments. Many of the events associated with the project have also been affected by the budget cuts, with public funds in Kurdistan quickly running out.

Hamza Hamed, the media and public relations officer for the Erbil governorate, told Asharq Al-Awsat the KRG had allocated some 20 million dollars from its budget to fund the project’s activities throughout the year. But following the problems relating to the dispute with Baghdad, the funds stopped rolling in.

He said the KRG was now resorting to asking the private sector in Kurdistan for help after Baghdad refused to help with the project. Hamed said Erbil had called on Prime Minister Maliki to support the project because it was “a federal project” like those which awarded Baghdad and Najaf the Arab and Islamic capitals of culture for 2013 and 2012, respectively—projects the federal government in Baghdad had supported. In the end, though, “unfortunately [Baghdad did] not respond to our requests.”

Tawfiq Sheikhani, public relations manager of Cork Communications, one of the private companies that heeded the call of the KRG to chip in and support the Erbil project, told Asharq Al-Awsat his company was now in constant contact with the government and civil institutions in Iraq and Kurdistan, and was happy to help.

“As sponsors of government institution activities in normal times, our responsibility in the private sector has become greater. We cannot allow all activities to stop in a country which is suffering a financial crisis,” he said.

As for a solution to the dispute, things seem to be heating up. Kurdistan officially sold its first batch of oil independently of Baghdad—1 million barrels previously stored at the Ceyhan port in Turkey—10 days ago, and the Iraqi government threatened on Sunday to take legal action against the KRG, with the latter claiming there was no legal basis for any arbitration.

So with both sides firmly holding their ground on the issue, and with Erbil one of Iraq’s main oil-producing regions—claiming to hold some 45 million barrels of oil in reserves and currently producing 220,000 a day—the oil revenues that are the very source of the problem, may also be its solution.