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The Iraqi-Kurdish Oil Deal And The Fight Against Islamic State
In early 2014, the Kurdistan Regional Government (KRG) began independently exporting crude oil through Turkey, angering the central Iraqi government which “claims sole authority to export oil from the country”. In total, the KRG exported over 32 million barrels of oil amounting to $2.5 million.
The Iraqi government responded by cutting the 17 percent share of government funding allotted to the KRG. This ***-for-tat scenario is not surprising considering the incongruous objectives on each side; the KRG desires independence and the Iraqi government wants unfettered access to northern oil fields.
The Iraqi-Kurdish infighting took a back seat when Islamic State (IS) militants invaded parts of northern Iraq in June 2014 and threatened oil fields in Kurdistan. The KRG and central Iraqi government recognised that a united front would be the most effective strategy to prevent the Islamic State’s advance.
This cooperation resulted in a deal in which the KRG will share revenue from the 250,000 barrels per day it had been exporting to Turkey. The central Iraqi government will increase exports through Kurdistan by 300,000 barrels per day during 2015. The government in Baghdad also committed to reinstating budget payments to the KRG and included a payment of $1 billion to the Kurdish military.
This agreement is significant for the fight against IS for several reasons:
The Islamic State is primarily funded by selling oil from occupied fields to smuggling networks across Iraq and Syria. The oil is then sold to the global marketplace or used by locals. A combined effort between Baghdad and the KRG to increase oil exports will further flood the market, keeping prices low and constricting Islamic State’s revenue from oil smuggling.
Baghdad relies on oil revenue for over 90 percent of government funding. The Iraqi government’s agreement with the KRG will ensure its aggressive production and export plan will offset a large portion of projected losses due to low oil prices and allow internal military operations against IS to receive adequate funding. This will provide Kurdish and Iraqi forces the best opportunity to stop the Islamic State’s advance and to choke off their main source of revenue by reclaiming occupied oil fields.
The agreement between Baghdad and the Kurdistan Regional Government will strengthen diplomatic, economic and military ties within Iraq. This will prevent IS from continuing to capitalise on internal conflict, making further advances within Iraq more difficult.
This agreement is not a solution to end centuries of conflict between the Kurds and their neighbours. It is also not a panacea for the fight against the Islamic State, though its significance should not be understated.
There are no short-term solutions to stopping the Islamic State, however future success is dependent on continued cooperation between Baghdad and the KRG, ending the civil war in Syria, and developing a coordinated diplomatic strategy involving Iran, the Gulf States, and Turkey.
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In early 2014, the Kurdistan Regional Government (KRG) began independently exporting crude oil through Turkey, angering the central Iraqi government which “claims sole authority to export oil from the country”. In total, the KRG exported over 32 million barrels of oil amounting to $2.5 million.
The Iraqi government responded by cutting the 17 percent share of government funding allotted to the KRG. This ***-for-tat scenario is not surprising considering the incongruous objectives on each side; the KRG desires independence and the Iraqi government wants unfettered access to northern oil fields.
The Iraqi-Kurdish infighting took a back seat when Islamic State (IS) militants invaded parts of northern Iraq in June 2014 and threatened oil fields in Kurdistan. The KRG and central Iraqi government recognised that a united front would be the most effective strategy to prevent the Islamic State’s advance.
This cooperation resulted in a deal in which the KRG will share revenue from the 250,000 barrels per day it had been exporting to Turkey. The central Iraqi government will increase exports through Kurdistan by 300,000 barrels per day during 2015. The government in Baghdad also committed to reinstating budget payments to the KRG and included a payment of $1 billion to the Kurdish military.
This agreement is significant for the fight against IS for several reasons:
The Islamic State is primarily funded by selling oil from occupied fields to smuggling networks across Iraq and Syria. The oil is then sold to the global marketplace or used by locals. A combined effort between Baghdad and the KRG to increase oil exports will further flood the market, keeping prices low and constricting Islamic State’s revenue from oil smuggling.
Baghdad relies on oil revenue for over 90 percent of government funding. The Iraqi government’s agreement with the KRG will ensure its aggressive production and export plan will offset a large portion of projected losses due to low oil prices and allow internal military operations against IS to receive adequate funding. This will provide Kurdish and Iraqi forces the best opportunity to stop the Islamic State’s advance and to choke off their main source of revenue by reclaiming occupied oil fields.
The agreement between Baghdad and the Kurdistan Regional Government will strengthen diplomatic, economic and military ties within Iraq. This will prevent IS from continuing to capitalise on internal conflict, making further advances within Iraq more difficult.
This agreement is not a solution to end centuries of conflict between the Kurds and their neighbours. It is also not a panacea for the fight against the Islamic State, though its significance should not be understated.
There are no short-term solutions to stopping the Islamic State, however future success is dependent on continued cooperation between Baghdad and the KRG, ending the civil war in Syria, and developing a coordinated diplomatic strategy involving Iran, the Gulf States, and Turkey.
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