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, and 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.

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 Govern- ment 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 Salih in the pamphlet’s opening interview, “and we need to do everything we can to embrace the benefits of this and nullify its problems.”


Such proclamations often fare better in theory than in practice. This is not to say that Kurdistan is not trying and largely succeeding. Under the plan outlined by “Invest in Democracy,” a wide range of new educational programs have recently been launched. From 2000 to 2010, the illiteracy rate was reduced from 37 percent to 17 percent, thousands of schools were constructed, and a new focus on providing higher education was put into place. Four new universities were opened in the past year and a US$100 million dollar scholarship fund was established for Kurdish students. On the infrastructure side, development continues at a rapid pace. Recently constructed power plants provide over 1,000 megawatts of relatively reliable electricity to the region’s largest cities, four-lane highways now connect Erbil, Kirkuk, and Mosul, new roads into Turkey and Iran facilitate cross- border trade, and oil refining capacity is expected to double with US$10 billion dollars of new investments in the energy sector from 40 different foreign companies.

Kurdish development, while encouraging, is qualified by certain caveats. Security and corruption continue to gnaw at the region’s economic growth and stability, and new waves of Kurdish separatism crash upon the rocky crags of the Taurus Mountains. The Kurdistan Workers Party (PKK), largely complacent following the US invasion of Iraq, has grown in strength and audacity, with two separate attacks claiming the lives of seventeen Turkish soldiers and wound- ing seventy more in October 2012. Each attack imperils the growth of trade across the Turkish border while contributing to the gradual destabilization of the region on the heels of the Arab Spring.


As a perilous security situation endangers political and economic stability on the ground, corruption imperils the region’s long-term economic future. Much of Kurdistan’s new wealth is concentrated in the hands of a powerful few. In April, police arrested Zana Salih, mayor of Sulaymaniah, Kurdistan’s second largest city, on embezzlement charges. He reportedly squandered away close to US$500 million of foreign aid. Mr. Salih’s story is an exception not because he was corrupt, but because he was caught: many more like him continue to feed off the system. Political and familial ties often determine success, with one of Kurdistan’s largest tele- coms corporations, Korek Telecom, chaired by the nephew of the Kurdish Democratic Party’s leader, KRG President Barzani. Another telecom firm, Asiacell, once held sole op- erating rights in the areas dominated by a different Kurdish political party, the Patriotic Union of Kurdistan (PUK). In recent years, corruption has been largely overlooked in favor of rapid development. However, there are moments when overlooking corruption can have violent consequences, in both a literal and political sense.

Just as Iraqi Kurdistan is not without its corruption, it also is not without its cover-ups. On the fifth of May 2010, citizens of Mosul stumbled upon the body of 23-year-old Sardasht Osman. Osman, an aspiring journalist and English student, disappeared two days earlier after a kidnapping outside Salahadin University’s language department. His death surprised few of his colleagues. The author of several widely publicized articles exposing corruption within the KRG, he had received a number of menacing phone calls threatening him to discontinue his investigations. He did not. A month before his death, Osman wrote an article for an expatriate Kurdish newspaper heavily criticizing Mahmoud Barzani and Kurdistan’s corrupt politics. Protests following his death were quickly quashed with displays of police authority, promises of reform, and the formation of an “investigatory committee” to root out the identity of his killers. Months later, the committee blamed Ansar Al-Islam, a Sunni extremist group, for the killing. Those close to Osman doubt their statement and continue to point fingers at the KRG’s intelligence services. The truth remains buried deep beneath layers of bureaucracy—layers only tentatively unearthed by Kurdish authorities in a new push to curb underhanded dealings.


That push began in 2009, when Kurdistan sent a delegation to an anti-corruption conference held in Doha by the United Nations Office on Drugs and Crime. Following proclamations of transparency, the KRG enacted tougher policies to combat bribery and exploitation. Unfortunately, many of these efforts were still too limited and too weak to accomplish meaningful reform, prompting an electoral backlash. In 2009, dissatisfied members of the PUK formed a new party in opposition to the ruling KDP-PUK coalition, calling themselves the Gorran (Movement for Change). The Gorran Party gained early successes in 2009 and 2010 elections, running on an anti-corruption platform. KDP-PUK coalition members pushed through more reforms in response, some legitimately effective, many less so. Outwardly, the ruling parties point toward the success of Azad Malafandi and his anti-corruption committee in shutting down over 400 corrupt development projects, yet the KRG continues to struggle with cracking down on corruption in its own ranks. While still better than mainland Iraq, a culture of nepotism continues to make “who you know” more important than “what you know” when doing business in Iraqi Kurdistan.


Kurdistan is both Iraq’s greatest threat and Iraq’s greatest asset in its pursuit for peace, stability, and economic prosperity. Kurdish, Iraqi, and Western leaders can depend on several things: oil revenues will continue to fill coffers of a semi-independent state (and the pockets of the people who run it), the PKK will continue to aggravate conflicts along the border, and economic development will proceed at a rapid—albeit conflict-ridden—pace. But dependable circumstances pale in comparison to undependable ones, and most of those circumstances lie outside Kurdistan’s borders and therefore outside the KRG’s direct control.Across the border in Syria, conflict continues to rage, with grave consequences for the Middle East, Kurdistan included.

The Syrian civil war, just a few hundred kilometers away, blazes with an intensity mirroring Iraq in the days after the US-led invasion. But more than just terror and bloodshed appear in that reflec- tion: sectarian conflict, Islamic extremism, the flow of arms and jihadists—all images common to Iraq just a few years before—have returned. The two remain very different situations, however, with the pursuit of democracy, not revenge, the primary motivator. Yet day by day, hour by hour, reports of sectarian massacres continue as a Sunni majority revolts against its Alawite oppressors. Signs of division among sectarian groups have erupted outside of Syria’s borders as well. In Lebanon, limited fighting followed the assassination of Wissam al-Hassan, a prominent Sunni minister. In Iraq, tensions lie largely beneath the surface and are unlikely to erupt into conflict. But appearances can be deceiving. The Shiite-dominated federal Iraqi government has displayed limited support for Mr. Assad and his Alawites, a breakaway sect of Shiite Islam. In Iraqi Kurdistan, with its Sunni majority, support tends to go towards the Sunni Syrian Kurds, and more sporadically, to the opposition.

The relationship between Syrian Kurds and Iraqi Kurds has grown as the conflict has progressed. The hope for a unified Kurdish population, separated by borders but united in freedoms, keeps many Kurds optimistic about the upris- ing. Denise Natali, a Middle East expert at the National Defense University in Washington D.C., observes, “This is certainly a changing moment and an exciting moment for Kurds and those who study the Kurds because it appears as if those boundaries that were set at the state formation period seem to be breaking away.” However, such hope doesn’t always translate into trust. Unlike other minorities in Syria, the Kurds share the Sunni Muslim traditions predominant among the opposition, but religion does not guarantee cooperation. Many Syrian Kurds are suspicious of opposition elements and play a balancing act between the Assad regime and the Syrian National Coalition. Minor fighting has even occurred between Kurdish militias and other Syrian opposition groups. With the strengthening of ties between Iraqi Kurds and their Syrian counterparts, the KRG watches events in Syria carefully. Any display of hostilities towards Syrian Kurds, and newly empowered Iraqi Kurdistan will likely come to their aid—unless the PKK gives them a hand first. No matter the outcome, the level of tension between the KRG and the federal Iraqi government is likely to increase with any escalation of sectarian rivalries in Syria. Kurdish populations may well come to determine whether Assad stays or falls, either lending critical support to Syrian rebels or adding new ranks to the Free Syrian Army. Their actions in the coming months will largely depend on events out of anyone’s control, presenting both a threat and an opportunity for Iraqi Kurdistan to exploit.


The Arab Spring also presents a challenge on the domestic front. Calls for reform joined mass protests in the Kurdish capital of Erbil last spring, challenging the KRG’s efforts to maintain the status quo. In the ensuing fallout, the opposition Gorran party organized new protests that quickly escalated into direct conflict between protestors and police. Demonstrators renewed demands that the leaders of the KRG step down, with  some even proposing full independence for Kurdistan. Although protests subsided without a mass turnover of leadership, the threat of an Arab Spring-style sweep places a heavy burden on the KRG and its federal counterpart in Baghdad. Nationalist calls for an independent Kurdistan stretch from Iraq to Kurdish provinces in Syria, and while an unlikely ideological dream, they pose a constant danger to the success of Iraqi Kurdistan. If handled irresponsibly, the hard-fought journey toward stability in the autonomous province could be for naught.

It is hard for any nation to accept that much of its future depends upon events outside of its control. For Iraqi Kurdistan, acceptance of this fact will be perhaps the most important guarantor of its future success. Playing too great a role in the Syrian conflict and pursuing its own foreign policy agenda not only poses risks in the event of failure but also draws too sharp a boundary between Baghdad and Erbil—a boundary that may form in the near future, but is not yet ready to be placed in the coarse Iraqi sand. Full independence, while arguably a long-term necessity for Kurdistan, must be post- poned until the Middle East stabilizes. Until then, Kurdish leaders, whomever they turn out to be, must do two of the most difficult things in politics: watch and wait.


Kurdistan is still a far cry from a perfect post-war model of Iraq. Obstacles will continue to stand in its way, some predictable, many not. For now, Kurdistan has much in its favor: oil revenues, foreign investment, capable security forces, and relative peace. But it walks a tightrope shaken by the winds of the Arab Spring and forces outside its control. With the proper set of economic, political, and security policies and a dose of caution in pursuing nationalist goals, it may soon realize its full potential. Iraqi Kurdistan may not be the light in the darkness that the West hoped for, but it could easily be a glimmer of hope growing across the horizon, a glimmer fueled by oil, but powered by reinvestment.