Kurdish Autonomy Update (2019)

New Kurdish Regions

At Desai Legal Services, I always want to help people and companies with common business challenges, but also I want to help businesses with import or export challenges, with investor or worker visa challenges, asset transactions internationally, and just generally, to help business operate legally and efficiently between countries.

And so I will be doing a few articles to highlight a few unconventional growth markets and economies that one day may present business opportunities and challenges.

My first story draws heavily on my favorite news source, the British newspaper, the Economist and thier reporting on the thriving Kurdish region, sometimes referred to as Kurdistan that lays across Iraq and northern Syria.

If you are not familiar with Kurdish peoples, they are an ethnic group (with their own language and culture) of about 35 million people, arguably the largest ethnic group in the world without a state of their own. They are the fourth largest ethnic group in the Middle East and they live in an especially challenging situation, sort of in the middle, stradling relatively large regions of Iraq, Iran, Syria, and Turkey.

Just after WW1, the victorious European colonial powers divided up that region of the Middle East into the artificial countries and boundaries we are familiar with today. However, the Kurds were not allotted a nation of their own, and the rich oil reserves and natural resources that are within their homeland were divided up amongst the several countries. Though some of those countries have granted them limited autonomy in certain regions, they also have often been subject to persecution and exploitation.

But the Kurdish region has been the subject of a lot of good news lately.

In Iraq (the area known as Iraqi Kurdistan) the Kurds have been thriving in the past year and have been able to bring several valuable oil and gas development projects online. In fact, according to Falah Mustafa, the foreign minister for the Kurdish Regional Government (KRG), their wells could begin supplying the rest of Iraq with gas by next year, and exports of gas to Europe via Turkey could follow in 2022.

The Economist reports that Iraqi “Kurdistan’s economy has been booming.” And this is despite a controversial referendum, in which the Kurdish people voted to declare independence from Iraq. This caused the Iraqi government to expel Kurdish authorities from the oil producing region of Kirkuk, to end budgetary support for the Kurdish regional government and, with the help of Turkey and Iran, closed its airspace and some border crossings.

This diplomatic crisis was resolved through a power-sharing agreement and now the public sector (which is a large part of the Kurdish economy) is up and running again. As the Economist reports, “Flush with cash, families pack restaurants and malls. Payments have resumed to contractors. Workers are again building motorways. Kurdistan’s airspace has reopened… Trade with Iran, Turkey and north-eastern Syria, which is held by Syrian Kurds, is flourishing. Although the central government took control of Kirkuk and its oilfields, it exports much of the black stuff via the KRG’S pipeline, paying transit fees.”

In Syria too, the Kurdish region is flourishing. Over the past 7 years of the chaos caused by this international war in Syria we’ve been hearing about, the Kurdish peoples have seized the opportunity for the exercise tremendous autonomy in Northern Syria.

During the war, Syrian President Bashar Assad had to pull many regiments from Northern Syria in order to defend the capital city, Damascus in the South, leaving control to local militias. Kurdish political groups and militias, supported by the U.S. government have captured about a third of the Syria.

This area is tremendously valuable, containing the majority of the oilfields in Syria, as well as some of the most valuable farmland, especially for wheat and grain, along with important power and freshwater infrastructure. And the U.S. government is underwriting the Kurdish peoples control of the region with around 2,000 American troops on the ground and U.S. military warplanes patrolling overhead.

This American support has allowed this Kurdish region to rebuild and prosper. Whereas other Syrian regions are suffering under violent skirmishes between the Syrian military, Syrian rebels, ISIS and various Jihadist groups, Russian forces, Turkish forces, and other entities, as well as suffering under a lack of financial resources due to American-led sanctions, the Economist reports that in the Kurdish region, “Western-funded aid agencies [are] repair[ing] infrastructure, hospitals and schools,” and the oil industry is able to return to business and start sending oil tankers across the country. Moreover, with over 5000 American troops in neighboring Iraq, this region is benefitting from logistical support coming over from the Iraqi border.

The Kurdish people in the region have even been able to establish their own Parliament in September. And the leadership of this Kurdish region is making attempts to establish a progressive and tolerant state that is representative of their very progressive, educated, tolerant, and religiously liberal population. There is equal representation of women throughout the leadership of the Kurdish state with many senior female officials.

Since the number of Arabs (who obviously speak Arabic) in this Kurdish region slightly outnumbers the numbers of ethnic Kurds, the Kurdish Parliament has made many attempts to include and accommodate the sensitivities of their Arab constituents:

· They have changed the name of their state from Rojava, which is a historically Kurdish phrase to the more inclusive “Autonomous Administration of North and East Syria” (NES).

· They “moved the administrative capital from Qamishli, a Kurdish city, to Ain Issa, a drab Arab town.”

· Finally, “Arabs have been appointed to many senior positions in government.”

· Moreover, half of the local army, the Syrian Democratic Forces is Arab

However, the future of the control of the region is precarious and as is clear from the region in which this state exists, this region faces geo-political threats from all sides.

The most threatening and destabilizing influences look to come from the Syrian government, the Turkish government, and the Russian government, and ISIS.

Lets start with the Syrian government: Though President Assad does not seem to nurture ambitions to assume power and control by military force, his administration seems to be trying to divide and control by exploiting ethnic tensions between Arabs and Kurds. His administration has been holding tribal gatherings with Arab tribal leaders and recently, the Deir al-Zour’s oil wells have been blocked by protestors chanting, “The Kurds have stolen our oil.”

And we cant forget the legacy sources of soft power that the Syrian government can exercise over the Kurds. For example, the Syrian government “runs the mobile-phone network and oversees many courts and schools.” The region’s only civilian airport is controlled by the regime, and if you fly-in you will see portraits of President Assad everywhere. And troublingly, travellers who work for the NES risk arrest.

But what makes the Syrian Kurdish situation so uncertain is the proposal by Russia that the Syrian army return to the Kurdish region, assume authority over military security, and turn Kurdish forces into local police.

This situation is further exacerbated by Turkish military and intelligence incursions into norther Syria. And Turkey has had perhaps the most strained relationship with its Kurdish population, having been in an ongoing military conflict since 1978 with more militant Kurdish political and paramilitary groups in Turkey, Iraq, and now Syria.

And we haven’t really mentioned the threat from IS which persists in the Kurdish region…

But for now with the U.S. military presence virtually guaranteeing security, the Kurdish region in Syria is looking up…

One last note, though it is very reassuring to know that our tax dollars are going to protect a persecuted, but progressive, and tolerant minority group in a poor, developing nation, it is important to remember that U.S. military, intelligence and industrial interests in the region are perhaps less charitable.

I’m all for business and I believe that business and economic development is a force for good. But, it is important that those U.S. companies that do business in the region and help develop natural resources including oil and gas bear their own risks. It is inappropriate to have to rely on U.S. intelligence and military support when local regimes no longer respect agreed upon contracts or try to nationalize or somehow expropriate natural resource or industrial assets from your company. Those are risks that you should bear as a foreign company going in, not your country’s tax payers…

And more generally, the temptations that sophisticated companies from advanced economies have to deal with with regards to natural resource extraction from more primitive economies, and I’m really talking about fossil fuel extraction, create another reason for us to move to more decentralized forms of energy including solar energy, which can be extracted by anyone with a field or even someone with a roof on a hut as opposed to energy which can only be extracted efficiently and then owned by a small group of extremely powerful, sophisticated, geo-politically connected firms…

But, anyways… Thanks for watching…