Academic journal article Harvard International Review

Not the Iraq You Know: But the Iraq That Could Be

Academic journal article Harvard International Review

Not the Iraq You Know: But the Iraq That Could Be

Article excerpt

Cranes pierce the blue sky, Western businessmen walk the streets, and capable militiamen and police officers patrol daily. It might be Dubai, if Dubai were landlocked, a few thousand kilometers northwest, and still possessed oil--but this is not the case. It is a snapshot of a new Iraq. Not the Iraq glimpsed in news reports, an Iraq of car bombings, government corruption, and a political shift towards Iran, but an Iraq of business, social, ana political opportunity. It's an Iraq of hope, the Iraq the United States hoped to leave behind.

The tranquil peace does not always go uninterrupted, however. Bombs still go off. US soldiers remain in a few isolated camps. Corrup-tion continues--albeit at a much-reduced level. It is not a perfect picture of a new Iraq, as deep scars still mar the pleasant exterior. But the economic development, relative peace, and the functioning, largely cohesive governing system behind Kurdistan's success hold the keys, and reveal many of the potential obstacles, to Iraq's success.

Oil continues to drive the push for business growth in Kurdistan, and business is booming. Ashti Hawrami, Kurdistan's Oil Minister, has publicly announced that oil exports are expected to hit 200,000 barrels per day (bpd) by the end of October, and 1 million bpd by 2015. He has also announced the construction of a new oil pipeline across the Turkish border. Expected completion: 2014. Expected capacity: 1 million bpd. Two multinational Dutch trading companies recently brokered a deal with the Kurdish Regional Government (KRG) to open up exports by trucking crude through Turkey, and major energy giants are hot on their heels. Chevron purchased 490 square miles north of Erbil this past July, a big move for the historically cautious company. ExxonMobil proposed a partnership with the KRG over a year ago, seeking larger profits than those found by doing business in mainland Iraq. With business friendly practices, openness to the West, and 45 billion barrels of oil hidden just beneath the desert sands, such deals are likely to continue--much to the chagrin of the federal Iraqi government.

Tired of receiving a smaller piece of the pie, the Iraqi government, led by Deputy Prime Minister Hussain al-Shahristani, attempted to stop a deal between ExxonMobil and the KRG earlier this year. After months of negotiations, ExxonMobil abandoned their previous oil development project in mainland Iraq, opting to sell it off and pursue greater profits in Kurdistan. The subsequent fallout from the deal places Western oil giants in a tough position. Oil exploration in Kurdistan began shortly after Saddam Hussein's fall in 2003, with the region's total reserves estimated at 40 billion barrels.

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Although that is a modest number when compared to Baghdad's 143 billion barrels of reserves, short-term profit in Kurdistan greatly exceeds the offerings to be had with the Iraqi government. Wood Mackenzie, a Scottish consulting firm familiar with the Middle East, estimates that for every dollar earned through contracts with the Iraqi government, three to five dollars can be earned through more lenient contracts with the Kurdish Regional Government. The current outlook for many companies is thus: Kurdistan equals profit, Iraq equals risk. No matter the long-term consequences for Western business, one thing is assured: oil will continue to flow for the Kurds.

But oil prosperity is short-lived, and the KRG knows this - somewhat. Oil revenues continue to be pumped back into the country's educational systems and infrastructure, at least in theory. In 2011, the Kurdish Regional Government released a pamphlet entitled: "Invest in Democracy." While largely a propaganda and advertising ploy, "Invest in Democracy" contained a detailed plan on moving the autonomous region away from a hydrocarbon-dominated economy. "We are well aware of building an economy so dependent upon one source," states Prime Minister Barham SaEh in the pamphlet's opening interview, "and we need to do everything we can to embrace the benefits of this and nullify its problems. …

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