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Oil Prices and ISIS Ruin Kurdish Dreams of Riches

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The civil war in Syria and Iraq and the rise of Islamic State (Isis) has brought the 30 million Kurds in the Middle East new terrors and fresh opportunities. In Syria, the conflict has led to the creation of a Kurdish quasi-state between the Tigris and Euphrates that fields a powerful army supported by US air power.

In northern Iraq, the defeat of the Iraqi army by Isis in 2014 enabled the Kurdistan Regional Government (KRG) to seize territory long in dispute with Baghdad and expand its area of control by 40 per cent. But in Turkey, it is the Kurds who are the losers in a renewed confrontation with the Turkish state that has its roots in war in Syria.

It is not a good time to be a minority in the Middle East and, though the Kurds are powerful today in Iraq and Syria, they remain a minority which will always be vulnerable to a change in the political tides. They know that what has happened to the Yazidis and Christians over the past 18 months, as ethnic and sectarian cleansing becomes the norm, could happen to them.

Yohanna Toyama, a community leader from the Christian town of Qaraqosh outside Mosul, whose 60,000 people fled when Isiscaptured it in 2014, has a stark view of the prospects for minority communities. “We will all be eaten by the majorities,” he says.

The Isis frontline is still only 40 minutes’ drive from Irbil, the Kurdish capital, but fear that its fighters would break through has largely dissipated. But the jihadi onslaught, that reached its peak in the second half of 2014, was only one element in the crisis convulsing the de facto state (controlled by the KRG) that is being devastated by an economic catastrophe.

Irbil and Sulaymaniyah, the biggest city of eastern Kurdistan, are full of half-completed building projects. And even when the grandiose hotels and malls are completed, they remain largely empty, monuments to the KRG’s failed attempt to become an oil state like Dubai or Kuwait.

The ambition was an act of hubris, which assumed that the price of oil would remain high and that KRG could become an oil state acting independently from Baghdad. I was in Kurdistan three years ago at the height of the boom, when delegations of foreign businessmen were packed into luxury hotels as sceptical Kurdish friends were complaining about the absence of good hospitals or schools for their children.

The exuberant mood reminded me of Ireland at the height of its Celtic Tiger boom, when much of the population thought they were magically going to become rich. In the event, the death of the Kurdish Tiger economy since 2014 has been far more spectacular and devastating than anything seen in Ireland. Everything depended on the price of a barrel of oil being over $100 while the KRG is now believed to be getting just $21, barely enough to cover a third of its expenditure. Around 740,000 people are on the government payroll and few have received their full salaries over the past six months; many have been paid nothing at all.

Some Kurds were always sceptical about the vision of Kurdistan as an oil state, arguing against the creation of a system where people got a cut of the oil revenues without doing much work while the ruling elite received a license to plunder. After the overthrow of Saddam Hussein in 2003, the KRG advertised itself as “the other Iraq” which was supposedly run in a different and more efficient way than the corrupt and dysfunctional government in Baghdad. In reality, the two political and economic systems were very similar, with authoritarian leaders seeking to monopolise power through control of oil revenues.

Oil is like opium in that it fosters dangerous dreams from which the Kurds are now awakening, but the withdrawal symptoms are painful and, on occasion, fatal. There are frequent funerals of people, who, despairing of being paid and with their savings gone, drown in the Aegean trying to make their way to Europe. Aside from oil, the KRG produces very little and almost all the goods in the markets are imported from Turkey and Iran. Kurds remark that “we don’t even grow our own tomatoes any more”.

“All the villages have emptied since 2003 because people knew they could get well-paid government jobs in the cities where they wouldn’t have to do much work,” says Falah Shakarm, who runs the Wadi NGO which promotes human rights and civil society. He is a survivor of the poison gas attack by Saddam’s forces on Halabja in 1988 when an estimated 5,000 people were killed. He recalls that he fled at the age of 14, along with his brother and small sister, into the mountains above Halabja where they hid in a cave: “We turned in one direction out of our front door and survived, but our next-door neighbour turned in another along with his wife and 10 children and the gas killed them all.”

Mr Shakarm regrets the destructive impact of excessive oil revenues and aid money on a Kurdish society unable to use it constructively. He illustrated what he was saying by pointing to the Halabja Treatment Centre, a large new building in Halabja which was designed to treat the thousands of people disabled by the poison gas and was paid for by Japan. He said the centre was finished three years ago, but is empty and has never been used, because there is no money for staff and equipment. He added that Wadi has had difficulty getting funds for a small radio station run for and by displaced people and refugees simply because the project is too small.

In the radio station in Halabja, Kurdish and Arab women explain that “this is the only place that we can breathe free”. Hanin Hassan, a young Arab woman who left Fallujah two years ago, said she had just been accepted at Baghdad University when she and her family had to flee Isis. “Here women are respected, but in Fallujah conditions were terrible for us,” she said, adding that working at the radio was “a rich experience for me”.

Leila Ahmed, a Kurd from Al-Hasakah in Syria, said her family had fled the fighting, but she was less impressed by the status of women in Halabja, a notoriously conservative city, compared to Syria: “We had more freedom there when it came to clothes and the ability to leave the house.”

It is easy to be critical in retrospect of KRG leaders for becoming over-dependent on oil revenues that relied on good relations with Baghdad and a high price for crude. And, if they did not foresee the rise of Isis, nor did anybody else. For the moment, the Iraqi Kurds are politically and militarily strong because other powers need them as an ally against Isis, but this will not last.

The Kurds are discovering, as have others before them, that oil is a poisoned gift that creates a distorted state, economy and society that cannot function when the oil revenues run dry.

Patrick Cockburn is the author of  The Rise of Islamic State: ISIS and the New Sunni Revolution.

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