The backdrop to a raging battle with the Islamic State (IS) in Iraq is a raging political battle for control of the vast oil wealth of the country.

The billions of barrels of oil reserves under the Iraqi feet should be a real treasure and a divine gift but it has proven much more of a historical curse.

First misuse of revenues under Saddam Hussein to fund expensive wars and campaigns of repression against the Kurds and now since 2003, with the exception of the Kurdistan Region, Iraq is in a worse state in terms of economy, infrastructure and public services in spite of record revenues in recent years.

Control of oil exploration and revenues has been a real thorn in the relations between Kurdistan Region and Iraq. Several years later, no national hydrocarbon law exists and disputes continue to linger.

Many agreements have been reached between Erbil and Baghdad, often through gritted teeth and bitterness than real compromise or a common vision. As soon as the oil taps have turned on, it hasn’t been long before they were switched off again.

In addition to the rise of IS in large swathes of Iraq, another milestone in 2014 was the first independent Kurdish oil exports and revenues.

It may have sent relations with Baghdad spiraling downwards but certainly for their self-sufficiency and increased autonomy the direction was firmly upwards. Baghdad has sporadically paid Kurdistan’s share of the budget since January 2014 and Kurdistan was forced to take unilateral action but at the same time found itself in legal grey zones.

Finally, a deal was struck in late 2014 between Erbil and Baghdad that brought much optimism. Signs of unity and a willingness to find a true solution to the age old dispute came as IS remained deeply entrenched in Iraq.

The Kurds committed to export 550,000 in 2015 and in return Baghdad would resume over $1billion of monthly budget payments.

However, it didn’t take long for the agreement to become a source of more contention.

The Kurdish government has long complained that they have kept their end of the export bargain but Baghdad, suffering a massive budget deficit due to the crash in oil prices and owing over $21 billion to oil companies alone, was not moved.

Then comes the sheer irony. Kurdistan Region is washed with oil and yet still relies on budget payments from Baghdad. Oil revenues are the last noose or umbilical cord that Baghdad has over the Kurds.

Do the Kurds play the patient game that has borne little fruit or do they cut the umbilical cord and go alone, by receiving revenues directly or going after the buyers of Kurdish oil via SOMO, after all Baghdad has frequently threatened to sue buyers of Kurdish oil.

Kurdistan would receive more revenues than Baghdad would ever give if they exported directly from fields under their control. Then there is the plethora of oil companies in Kurdistan who are suffering due to the oil noose around the region. The capacity and infrastructure is there but the oil companies of course need their own revenues.

Kurdistan has criticized Baghdad for treating them like an oil company then a key part of Iraq. Although both Erbil and Baghdad recently reinforced their commitment to the deal, the government of Kurdistan has a very clear plan B. sells their own oil and receives revenues directly and bypass Baghdad altogether.

It may strike the ire of Washington who has placed firm political conditions on their campaign against IS, but if the disagreement continue unabated, then the immense oil under Kurdish feet continues to feel like a curse when salaries are unpaid, services are disrupted and the economy is hit.

First Published: Kurdish Globe

Other Publication Sources: Various Misc