Veteran foreign correspondent Reese Erlich has reported from the Middle East for nearly 30 years. Here he analyses the latest conflict in Iraq in the context of Kurdistan’s massive oil boom.
Fauzi Ali fights back tears as she explained how she and her extended Yazidi family fled over dangerous mountain terrain and into the Kurdish region of Iraq.
‘The Islamic State attacked our village and killed people, even children,’ she says. ‘They took some of the women with them. We were afraid for our lives and left.’
Ali was among the tens of thousands of Iraqis who left their homes in the face of an Islamic State onslaught in August.
The US, backed by Australia, began air attacks against IS in September. The US dropped bombs on insurgent targets in Syria as well. Both governments say they seek to fight terrorism by stopping Islamic State militants. Kurdistan has an estimated 45 billion barrels of oil reserves. Some analysts say that western intervention is motivated by interest in that oil. Meanwhile, the Kurds may insist on independence from Iraq before the war ends.
Antonia Juhasz, an oil analyst and critic of US policy, says the US bombing is merely start of a slippery slope into yet another disastrous Iraq war.
‘It’s incredibly unlikely that using a bombing campaign against the Islamic State will end well,’ she says. ‘The Iraqis will only see it as a continuation of what has taken place before. That created the failed state in Iraq, the incredibly heightened tensions between ethnic and religious groups and highlighted that the US was willing to go to any lengths to get oil.’
The end goal for the Obama Administration, says Ms Juhasz, is not protecting human rights, but exercising political and economic power in the region.
‘Western oil companies have a lot of interest in Kurdistan,’ she says. ‘The Obama administration was acting to deny that oil to IS and also to protect western oil interests. I think Obama was also trying to threaten the central Iraqi government to say if you don’t get rid of [Prime Minister Nouri] al Maliki, if you don’t reform and get a new government, we, the US, will take the side of Kurdistan on independence. The result is that the Iraqi government very rapidly played ball and is now in line with US interests.’
In an old photo, US Army Colonel Richard Nabb in full camouflage uniform stands next to Masoud Barzani, now the president of Iraqi Kurdistan. In the early 1990s, Colonel Nabb was head liaison officer between the Kurds and the US military, working closely with Kurdistan’s two main political leaders, Barzani and Jalal Talabani.
‘I learned to love ‘em, respect ‘em, understand that they had a vision for their people,’ he says. ‘And they’re all pro-US.’
Shortly after the end of the Gulf War, Colonel Nabb retired from the army. He and other former officers, including two generals, later got jobs in the oil industry and returned to Erbil.
They knew nothing about oil exploration, but they knew the Kurdish leadership well, an arrangement that was to become mutually beneficial. Asked if he makes use of his old contacts as a businessman, he chuckles and says, ‘Of course, I knew them all. They knew me.’
Colonel Nabb says he and his oil company cohorts want to shift US policy to be more favorable to Kurdistan. ‘We wanted, quite frankly, to develop American business interests here that would trump what we all believed was bad US policy.’
According to Ms Juhasz, Colonel Nabb is just one of many former American military officers and diplomats who have gone to work for oil companies doing business in Kurdistan. Such officials, she says, are ultimately interested in making profits for the companies they work for.
‘Those companies, including oil companies, want to maintain their access to Kurdistan.’
The potential oil company profits are huge. Kurdish officials estimate their oil reserves are the ninth largest in the world. Kurdistan also has some six trillion cubic metres of natural gas. Long-term, the regional government hopes to replace Russia as a major supplier of oil and gas to Europe, which could shift the strategic balance of power between the US, Europe and Russia.
‘Ever since the US occupation of Iraq began in 2003, the Baghdad and Erbil governments have both claimed ownership of the oil in the Kurdish region,’ Ms Juhasz says.
In recent years, Kurdish officials have defied Baghdad, signing contracts with western oil companies, developing their own oil fields, and sending truckloads of crude to Iran and Turkey.
In December last year, the Kurdish Regional Government opened an oil pipeline to Turkey. It currently exports about 120,000 barrels a day. The Kurdish authorities want to increase that to one million barrels by 2015. Even that will be far less than the 3.15 million barrels pumped in the rest of Iraq.
‘Kurdistan is competing fiercely to attract international oil corporations,’ says Ms Juhasz. ‘Kurds sought very aggressively to support of the west by moving even further ahead than the Iraqi government, by passing laws that granted all that the western oil companies could ever want, to access the oil.’
The Kurdish regional government lured international oil corporations by signing production sharing agreements. Oil companies front the money for exploration and if the oil gushes, they receive close to 18 per cent ownership.
The oil ministry in Baghdad, on the other hand, only signs service agreements under which the oil companies receive a fee for every barrel produced. The multinationals were never happy with those agreements because of the relatively low profit margin.
Some Kurds complain that the production sharing agreements will mean greater exploitation of their oil.
‘I learned that it takes a lot of money to make money in oil,’ says Colonel Nabb. ‘If they get a dry hole, they’re out. If they hit, it’s a win for the Kurds, too. The Kurds get 80 per cent of what’s produced. For the Kurds, this is a good deal. This is your future we’re investing in.’
If the oil field is jointly developed by a number of companies, the Kurdish ownership could drop to 25 per cent or less, however. The regional government also provides massive tax breaks.
Foreign companies investing in the Kurdish region, including oil corporations, pay no taxes for the first 10 years of operation and are able to import items used in business without customs taxes. As a result, over the past few years, major US companies have opened offices in Erbil.
Oil company plans, however, were scrambled when IS militants attacked northern Iraq in June. By August, many companies had evacuated staff, fearing an IS assault on Kurdistan and general instability in the region. Western oil companies also worry about the newly expanded Kurdistan. According to Ms Juhasz, they’d prefer to operate in Kurdistan while continuing their operations with the central government in Baghdad.
‘A unified Iraq has a better chance to be stable than a Kurdistan fighting against the central government for independence, which is not going to be simple, and will be bloody and drawn out,’ she says.
Kurdish officials, however, say that once IS is expelled from Kurdish areas, independence will be back on the table.
‘Kurdish independence and self determination are our God-given, natural right,’ says Hemen Hawrami, one of the leaders of the ruling Kurdish Democratic Party. ‘We cannot wait another 10 years to see how Baghdad is going. We are not stepping back from the efforts of practicing this self determination right.’
This push for independence will impact the international oil companies. They will be pragmatic, according to Ms Juhasz.
‘If the Kurds want independence, and there’s never going to be peace between the two countries, then they’ll go for independence. For them it’s not about ideology. It’s about access.’
When the US began bombing northern Iraq in August, the Obama Administration said it was stopping the massacre of Yazidis. When the Yazidi crisis ended, the bombing intensified. Now the US and its allies are bombing insurgent targets in Syria, oil company executives are waiting to resume activity in Kurdistan, and the Kurds want independence soon. The Middle East’s most recent conflict appears unlikely to end anytime soon.
Listen to the full interview on Radio National, a branch of the Australian Broadcasting Corporation (ABC).