Towards the break-up of Iraq?
A series of disputes with Baghdad has raised questions about the possible secession of Iraqi Kurdistan from the rest of the country, writes Salah Nasrawi
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An Iraqi police officer searches people while another secures the area from the top of an armoured vehicle at a checkpoint in central Baghdad, Iraq, Sunday
Relations between Iraq's Shia-led government and the country's northern Kurdish region have taken a nose dive recently, with Baghdad and the self-ruled Kurdish enclave remaining gridlocked in a row over power and resources amid rising uncertainty about the country's survival as a single nation state.
An accelerating dispute between the central government and the Kurds over oil revenues has marked the latest turn in Iraq's chaotic transition, underscoring challenges to the country's fledgling federal structure that was forged following the US-led invasion in 2003 that toppled the regime of former Iraqi president Saddam Hussein.
Iraqi Prime Minister Nuri Al-Maliki's government has said it is seeking to cut billions of dollars from the budget of the Kurdistan Regional Government (KRG) in Erbil, to make up for revenues from Kurdish oil exports not paid into the central government's coffers.
Since the overthrow of the Saddam regime, the Kurds have been receiving some 17 per cent of the Iraqi federal budget annually, most of which is generated by revenues from oil fields in Shia-dominated southern Iraq.
Relations between the Kurds and the central government in Baghdad worsened when the Kurdish government began signing contracts with foreign oil companies for the exploitation of oil resources in Kurdistan. The KRG has so far signed over 50 contracts with foreign oil companies, which Baghdad considers to be illegal.
In April, the Kurdish authorities halted exports from oilfields under its control through a government-operated pipeline to Turkey, claiming that Baghdad was illegally withholding revenues. The move infuriated the central government, which in turn reduced refined oil products shipped to Kurdistan and threatened to cut the Kurdish region's share of federal funds.
This month, the Kurds started exporting oil to Turkey by truck under a deal signed with Ankara to export the crude without Baghdad's consent. This followed an agreement between landlocked Kurdistan and Turkey to build a new pipeline from the Kurdish enclave to a terminal on Turkey's Mediterranean coast.
Turkey and the Kurdish government are also in talks for the direct sale of natural gas to Turkey, which could later be expanded to connect Kurdistan with Europe. Some reports have suggested that huge reserves of natural gas, estimated at over 100 trillion cubic feet, have been discovered in the region.
A contract that the KRG signed with world oil giant ExxonMobil in October last year to explore in the Kurdish region has also fueled tensions between the Kurdistan region and Baghdad.
In response to the Kurdish actions, the Iraqi government authorised its finance minister last week to assess how much money the federal government has been losing as a result of the Kurdish oil sales, in order to start taking this from the state budget allocated to the Kurdish region.
In response, the Kurdish region, which has over a third of Iraq's oil reserves, seems to have accelerated its search for foreign partners by cooperating with the US and Turkey.
The Kurds have sought to attract international companies to the region by offering production-share agreements to energy companies while Baghdad has limited its agreements to service contracts.
Should such Kurdish efforts continue, Kurdistan could enter the world energy market in its own right and establish itself as an independent energy exporter.
To counter such efforts, the Baghdad government has warned Turkey against trading in Iraq's "smuggled oil", adding that this trade could damage Ankara's billions of dollars worth of trade and investment in Iraq.
Meanwhile, Al-Maliki has asked US President Barack Obama to stop ExxonMobil from exploring for oil in Kurdistan and adjacent disputed areas, saying that the US company's actions could have dire consequences for the country's stability.
With a current oil production of 300,000 barrels per day and an estimated reserve of 45 billion barrels, equal to more than 40 per cent of that of the rest of Iraq, Kurdistan hopes that by maintaining sovereignty over its natural resources it will become economically independent from Baghdad, a move which could bring it closer to secession.
In Kurdistan, oil and gas exploration and exports are increasingly being trumpeted as a decisive step towards national independence. Many Kurds believe that it is in Kurdistan's interest to take advantage of its own natural resources as a political and geopolitical instrument to gain international recognition.
With the value of its current oil production capacity being almost equal to the budget it receives from Baghdad in its annual 17 per cent share, the Kurdistan region is becoming a potentially strong and independent economy.
According to some estimates, crude output should grow to one million barrels per day (bpd) by 2014-2015 and to two million bpd thereafter, making the Kurdish economy even stronger.
The Kurds hope that such export capacity will consolidate Kurdistan's regional and international status and serve as a vital step towards eventual independence.
The oil dispute has come amid increasing tensions between the Kurds and Baghdad over a governmental crisis that has been gripping the country over the last seven months in which Kurdish leader Masoud Barzani has accused Al-Maliki of authoritarianism and has been pressing him to quit.
As the political crisis has intensified there have been reports of a military buildup on the border with the Kurdish zone, and Al-Maliki had ordered the establishment of a new Iraqi military command to defend disputed territories in the south of Kurdistan.
The Iraqi media reported this week that Al-Maliki has ordered the return of senior officers from the Saddam era to the army, many of them Arabs from Mosul, Salaheddin, Diyalah and Kirkuk on the border with the Kurdish region and having fought the Kurds in the past.
Such disputes between Baghdad and the Kurds have led some Kurdish politicians and commentators to call for the region to secede from Iraq and to become an independent nation.
Barzani has himself on several occasions brandished the threat of Kurdish secession from Iraq, repeatedly saying that he might call for a referendum on self-determination in Iraq's three Kurdish provinces, as well as in other Kurdish-populated towns in the disputed areas.
Last week, Kurdistan launched a so-called National Security Council, which many observers have linked to the escalating disputes. The agency, with a budget of some $273 million and a workforce of around 30,000 people, combines security, military intelligence and anti-espionage services.
Barzani has also reportedly threatened to go to the UN Security Council to ask it to re-impose the UN-sponsored no-fly zone in northern Iraq that was originally set up to protect the Kurdish minority against Saddam's forces.
However, it is not yet clear whether the Iraqi Kurdish leadership has in fact taken the decision to declare Kurdistan an independent country or whether it is only maneuvering to make moral, political and economic gains.
Advocates of secession have found themselves opposed by others who believe that the Kurds should live in a reformed Iraq rather than insist on full independence.
Some Kurdish commentators argue that independence is far from being a realistic option. Nevertheless, as relations between the country's Kurds and the Shia-led government worsen, many observers believe that the crisis may already have reached the point of no return, threatening the existence of the Iraqi state.
With Kurdistan already operating like a state within a state, and with the process of post-Saddam state formation far from over, the possibility remains that Iraq will collapse at some point in the future.