Falling Oil Prices Threaten a Key Ally in Fight Against ISIS

Erbil (Arbil) Citadel of Hewlêr
Iraq's Kurdish Autonomous Region

Photo: Jim Gordon

Qubad Talabani, the Deputy Prime Minister of Iraq's Kurdish Regional Government, has issued an urgent warning that falling oil prices, combined with the costs of war and of housing refugees, is threatening the Kurdish Peshmerga's ability to fight ISIS (Daesh).

"The world is focused on the war against ISIS but nobody wins a war bankrupt," Talabani states. "I think this is something the coalition against ISIS really do need to factor into the equation."

The Kurdistan Autonomous Region (KRG), the front line against Daesh (ISIS) in Northern Iraq, which has seen ongoing gains by their Peshmerga with coalition air support, recently cut Daesh's supply line between Mosul and Raqqa. This makes the Peshmerga a key ally in the fight against the Islamic State, and our "boots on the ground" in Northern Iraq. However, as Talabani warns, "The most dangerous impact [of the oil price crash] it can have is on morale. We are getting desertions. People are leaving their posts -- it will increase."

The Kurdish news site, Rudaw, which has quoted Talabani in calling the oil crash an "economic tsunami" has written in an op-ed that the crisis leads to a "practical and moral necessity to bail out Iraqi Kurdistan."

While the Iraqi Kurds are not blameless in stresses to their economic health (articles describe a bloated bureaucracy in their ancient capital of Erbil relying on public sector salaries that depend on oil sales), there is also the cost of hosting 1.8 million displaced Iraqis and 280,000 Syrian refugees, and a history of disputed payments from Baghdad to the Kurds. This is what the Kurds say led them to sell their oil on the open market, setting up an untenable diplomatic triangulation between the U.S., Baghdad and the Kurds, and influenced by global companies that have embarked on oil ventures with Baghdad.

The Kurds complained in 2014 they were offered a third of their contractually promised payment after Baghdad claimed the Kurds had not met their required oil deliveries. The Kurds responded they simply did not have the amount of oil that Baghdad demanded, and needed the promised revenue share (a percentage Iraq's revenue) to support refugees and to fight the Islamic State.

Then, "in February 2015 [stated the Kurdish region's minister for natural resources, Ashti Hawrami], we went again to Baghdad only to discover that they have thrown their budget out of the window and were simply working with cash in hand. We told them that our state salaries constitute some $750 million - half of this to security and Peshmerga - so how could we live on just a third of our budget?"

The Kurds, worried by what they saw as "a theoretical [Baghdad] budget which isn't worth the paper it is written on" began selling their oil on the open market. Reuters reported, at the time, that Kurdish oil was making it to Israel and Hungary, with a Greek shipping line reported taking the oil to other ports, while two ships were turned away from the U.S. and North Africa.

With oil prices crashing, the refugee crisis in the Kurdish autonomous region reaching record proportions, and their successes on the battlefield requiring more and better arms and payroll, the Kurds are now asking for help.

What is at stake?

The Iraqi Kurds have one of the most effective ground forces taking on Islamic State militants. The Peshmerga's effective soldiers, whose name translates as: "Those who face death", have scored one success after another in driving Daesh (ISIS) away from the Kurdish Regional Government's boarders. Recently, as mentioned, in coordination with coalition airstrikes, the Peshmerga cut Daesh's supply line between Mosul in Iraq and Daesh's de facto capital of Raqqa in Syria. The Kurds are our boots on the ground in Northern Iraq.

It might seem like there's an answer: Fix the mess with Baghdad, transfer the oil to get the Kurds paid, but there are questions: Is Baghdad truly working on some kind of unaccountable budget? Do the Kurds have the oil Baghdad is demanding? Is that even possible with Kurds now selling on the open market. Does the oil crash complicate the payments even if the transfer could happen?

Complicating the crisis is Turkey, a NATO ally, with their position of "Kurds bad" (some Kurds) -- mostly referring to Syrian and Turkish Kurds who are members of the outlawed group, PKK, but also toward the related YPG and YPJ whom are making significant gains against Daesh (ISIS) in Syria (and with whom we have embedded Special Forces).

Turkey further complicated the crisis, once they finally entered the war against Daesh (ISIS), by bombing the PKK in Eastern Turkey with tragic results. This has lead to entire Turkish-Kurdish neighborhoods to become abandoned due to fighting, murders, arrests and bombings, and has put the coalition into an increasingly confusing diplomatic situation. Add Turkey's new conflict with Russia over the latter's involvement in Syria, and you have, in an over-simplified description, a mess.

The Iraqi Kurds have business dealings with Turkey on an oil pipeline (the flow of which is increasingly interrupted through theft and sabotage) and seek, through diplomacy, to maintain a dialogue with them. Despite that, given Turkey's attitude toward the Turkish and Syrian Kurds, along with Turkish fears of overall Kurdish independence, coupled with the Iraqi Kurds' problems with Baghdad over their sales to the open oil market, and the pressure from companies that have deals with Baghdad, the West's willingness to openly support Iraqi Kurds on issues that could become politically non-expedient in either Baghdad, with the oil industry, and in Turkey has, so far, been limited.

Adding to the complications, along with Turkey and Russia's new conflict on the Syrian border, is the, as yet insufficiently explained, Turkish forces that have been recently deployed outside Mosul -- near the Kurdish Peshmerga -- in Northern Iraq, an unknown factor in an increasingly confusing situation.

Regardless of the convergence (miasma) of self-interested and complicated politics, our strategy in Northern Iraq relies on the Peshmerga as one of the the most effective forces against Daesh (ISIS) in that region. The Iraqi Kurds have been effective on the field, and are beyond generous -- at this point to their economic detriment -- in support of refugees, which includes Yezidis, Christians, and Muslims, flooding their borders, and--not to be taken lightly--the Iraqi Kurds have long been one of the most reliable partners to the West.

These reliable partners are now asking the U.S. and the Coalition to help with a budget crisis worsened by collapsing oil prices and 1.8+ million refugees who've fled fighting in Iraq and Syria. Whether this is solved through direct funds or some kind of diplomacy with Baghdad (if that's even possible), it's a crisis in need of a quick and agile solution.

Author's note: In 2010, I interviewed Qubad Talabani about the success at that time of the Iraqi Kurdish region, which was experiencing growth and freedom hitherto unknown in Iraq. The Kurds were building universities, elaborate and elegant malls, investment was booming, their parliament had (and has, I believe) more women than men, their army, the Peshmerga, is coed, as is their police force. The Kurds had opened their autonomous borders to Iraqi Christians fleeing persecution in Baghdad, and had provided them with villages, homes and livelihoods that gave them new lives. They proudly claimed that not one Western soldier was killed behind their borders during the Gulf War or in the violent aftermath in the rest of Iraq. They have declared their gratitude to the U.S. for their newfound freedom and that they are our friends.

It was an optimistic article at a promising time. That was until Daesh (ISIS) exploded on the scene and threatened the 8,000 year old Kurdish capital of Erbil (Arbil) and genocide toward the Kurdish Yezedi minority stuck on Sinjar Mountain. The Kurds, after initial loses, and with help of U.S. airstrikes, fought back while opening their borders to more and seemingly unlimited refugees. They have lost scores of soldiers to the fight, and to capture and horrific execution, while they have shown compassion to dying Daesh (ISIS) fighters on the battlefield.

Has the Kurdish Regional Government made mistakes, should they have broken from Baghdad, could their bureaucracy be leaner, are some benefiting where others are not? Possibly, but who cares at this point? They are fighting for their lives and for ours, and have asked for our help.

Will the U.S. and the Coalition listen?



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