When in October 2022, Lebanon and Israel reached an agreement on their water boundaries (Karish gas field) with the mediation of the US administration, the world’s media agencies observed at this incident in a strange way. At the same time, Hezbollah leader Hassan Nasrallah, Lebanese President Michel Aoun, then-Israeli Prime Minister Yair Lapid, the European Union and Iran all considered themselves successful in it. This was an agreement, while Hezbollah was preparing to fire 3,000 missiles a week against Israeli economic targets in the Mediterranean.
The global energy market studied this Mediterranean event as a major threat. When the agreement was done, international agencies were delighted. For example, Dennis Ross, who served as White House assistant for Middle East affairs under Clinton and Obama, wrote an article at the Washington Institute entitled “When there’s good news about the Middle East, we should take note”. Five months later, there is similar news in Iraq.
On Tuesday (April 4, 2023), the Kurdistan Region and the Iraqi central government, after 18 years of writing the constitution, were able to resolve their ongoing issues to a high level, which previously could not reach a solution in light of the 2005 Iraqi constitution. What are the economic and political opportunities of this agreement for Iraq and the Kurdistan Region? What could be the future risks of this rapprochement?
First, an agreement ends conflict for a long time.
Agreement occurs when there are differences, but the internal situation in Iraq and the Kurdistan Region had passed the difference, even the disagreement between them continued for 20 years.
In the hours following the signing of the agreement, news agencies covered it as follows:
– Iraqi News Agency: Mohammed Shaia Sudani with an oil deal has end the 20-year dilemma with the Kurdistan Region.
– Kurdistan Regional Government (KRG) Prime Minister Masrour Barzani told Iraqi media that the agreement is in the interest of the country and we will strengthen our relations with Baghdad.
– France – 24 says: – An agreement between Baghdad and Erbil to re-export oil from the Kurdistan Region is an active step.
– Al-jazeera wrote: The oil deal between the Kurdistan Region and Baghdad is for all Iraqis.
-The Russian today: Iraqi Prime Minister announces an agreement to resume oil exports from the Kurdistan Region.
– Reuters published three reports in one day.
Second, Iraq in general and the Kurdistan Region in particular have won.
Iraq sold oil worth $115.657 billion in 2022; that’s 53 percent more than the country’s 2021 revenue. The budget bill sent to parliament on March 11, 2023 by the Council of Ministers for the three years (2023, 2024 and 2025), in which the salary and share of the Kurdistan Region to the extent of (12.6%). According to the estimation of (100) US dollars’ worth with (130) thousand dinars, the total budget of Iraq for 2023 is equal to 153 billion 93 million 932 thousand dollars. This is the largest budget in Iraq’s history. In addition to rising oil prices, the economic opportunities facing Iraq and the Sudani cabinet are as follows:
– Saudi Arabia is ready to invest $ 100 billion in Iraq.
– China is renovating and completing the Faw mine at a cost of $ 7 billion, and is building 1,000 schools throughout Iraq.
– Iraq and French company Total agreed to renew their oil contract worth (27) billion dollars.
– Iraq is reducing the amount of gas burned/wasted.
Diplomatically, Iraq has had the best relations with Turkey since the 1990s. Iraq has also played a role in mediating and bringing Saudi Arabia and Iran closer together. All this is making Iraq as a major turning point in terms of internal recovery and external outlook.
Nevertheless the dangers are numerous. Weapons are still in the hands of militias in Iraq. It is the worst and weakest point of the state that the “state” does not have its own power. Iraqis and the world in general have not erased the theft of the century from their memories, in 2022, in just two months, three billion and 750 million dollars were stolen and taken out, which is the swallow of every Iraqi. Since previous cabinets, 30 to 70 million liters of oil have been smuggled daily in southern Iraq. There is also a lot of chaos in the budget bill, the most obvious of which is that there is a shortage of 63 trillion dinars, which is 25% of the budget deficit and inflation Bring the short.
First, the Kurdistan Region, which has hundreds of thousands of unemployed youth, should quickly think about diversifying its economy through the agricultural sector, in order to increase job opportunities, increase domestic production and reduce dependence on oil revenues. Then turn this “agricultural” sector towards “industry”.
Second, another important aspect of this agreement is that there has been no open external mediation for a long time. In other words, the only main motivation of both sides of the agreement was that in the future, the intelligent one is the one who would not look at the yellow and red stars in the sky, but maintain his roles throughout the progress.
Third, the issue of natural gas is gradually coming up. What I have heard recently in dialogues with energy experts and consultants around the world is that this fire has been opened somewhere, but the incident is somewhere else! What makes this issue worse is that the Paris arbitration court, in addition to nine years in the case, had decided the outcome two months ago, but with the knowledge of the United States, France, Turkey, Iraq and the Kurdistan Region this oil agreement should be concluded in such a way that it will legitimize the export of gas from Iraq to Europe in the future throughout Mediterranean. Additionally, gas is not like oil, oil is a market, you sell your own oil and get your own dollars (black, white, Sunni or Shiite and Buddhist doesn’t matter), but gas is directly linked to geopolitical issues. This means that the Kurdistan Region needs think tanks, research, lobbying, market participation, dialogue, how to direct public opinion.