The fallout from the Sept. 25 illegitimate Kurdish referendum has resulted in a severe blowback for the Kurdish Regional Government (KRG), leaving further questions over what will be next for the Baghdad-Erbil relationship in Iraq. It is becoming increasingly clear that the decision to go forward with the referendum was a misjudgement on the part of Masoud Barzani, the now-former KRG president. For Iraqi politics to move forward between Baghdad and Erbil, compromise and mediation will be key as well as greater willingness to address longstanding contentious issues relating to contested territory, the sharing of oil revenues, and federal budget allocations to the KRG.
The retaking of the Kirkuk province from Kurdish Peshmerga by Iraqi security forces, with the support of the Popular Mobilization Units (PMUs) as well as regional and international allies in October, marked a key turning point. Economically, strategically, and symbolically, the loss of Kirkuk for the Kurds was a huge blow and exposed the divisions within the Kurdish leadership, which allowed for Iraqi security forces to move in with minimal resistance. The immediate imperative for both Erbil and Baghdad is to find a way to reach compromise over governance arrangements.
This compromise has already begun as the KRG accepted the Iraqi Supreme Court’s ruling that rejects any secessionist attempts of the Kurdish region. There is a realization amongst Kurdish leaders that pragmatic cooperation with leaders in Baghdad, as well as regional and international allies, remains the best way to secure Kurdish interests. As negotiations progress, re-establishing the working relationship between the KRG and the federal government will be very significant, given that it has eroded to a large extent since February 2014, when the Iraqi government under former Prime Minister Nouri al-Maliki cut off the government budget allocation to the KRG.
The absence of senior Kurdish politicians in Baghdad reflects the degree to which relations between Erbil and Baghdad have deteriorated. In 2003, senior Kurdish politicians were an integral part of lawmaking within the federal government in Baghdad.
Fast-forward to 2017, and we see barely any senior Kurdish lawmakers in Baghdad. In the aftermath of the recent events, it seems as though there is a realization among leading figures in Erbil and Baghdad that there is a need to de-escalate tensions, re-establish lines of communication, which had been relatively strong previously, and to meet at the negotiating table. This could form the basis by which mutual cooperation is rebuilt and confidence is re-established between Erbil and Baghdad.
The upheaval in the country caused by the rise of Daesh is an opportunity to rebuild the Iraqi state, and with Iraqi politics undergoing transitional shifts, continuing tensions between Erbil and Baghdad will undermine efforts. The imperative for both Erbil and Baghdad is clear: for Baghdad, it is in the interest of Prime Minister Haider Al-Abadi to avoid burdening Iraqi security forces with further military escalation given that their energy has already been committed to defeating Daesh.
For Erbil, the KRG under Barzani lost the support of many of its international allies over its decision to go ahead with the illegitimate referendum despite near-unanimous objections and refusing to negotiate with Baghdad. Returning to the negotiating table will help mend relations with the KRG’s allies.
Additionally, while all Kurdish parties supported the illegitimate referendum, the reality is that the pursuit of independence was undermined by divisions between the parties. For some, the referendum was seen as not much more than a gambit by Barzani to preserve his leadership over the KRG. This resulted in the rival PUK party reaching an agreement with Iraqi forces to enter parts of Kirkuk and eventually retake control of key oilfields from the Kurds.
Ultimately, Kurdish leadership underestimated the determination of Baghdad, alongside the U.S. and key regional allies Turkey and Iran, to prevent their secession. Without internal consensus and at least tacit support from regional and international allies, the Yes vote could not have been expected to be enough to deliver a viable independent state.
With the loss of the Kirkuk oilfields, the KRG is left with no choice but to strike a deal with the federal government. Oil revenue has been the basis on which the KRG was able to build its capacity, but the decisive action from Baghdad to wrest control of key oilfields in Kirkuk back from the KRG has stripped them of vital revenue from their budget. Working to mitigate these losses to the KRG budget is a critical need for a region that has struggled financially in recent years.
Key to the rapprochement between Erbil and Baghdad is both sides’ ability to reach an agreement over the federal government’s annual budget transfers to the KRG. Ensuring that the KRG is able to deliver public salaries to its civil servants will be important to meet governance needs. While the normal expectation from the KRG will be for the federal government to provide 17 percent of its annual budget to the KRG, there is still some way to go before both sides agree to a final budget as well as an agreement over oil revenues.
It is in the best interests of the KRG in Erbil and the federal government in Baghdad to meet at the negotiating table and plan a way forward together. The illegitimate Kurdish referendum escalated tensions further and exposed flaws within the KRG as well as the wider unresolved disputes over the Iraqi state.
Working to resolve issues relating to territorial disputes, oil revenue sharing, and federal budget allocations will take time, but will require concessionary measures in the short term to help reestablish confidence — both for the federal government and the KRG, and their allies. Being able to make progress on this front will be intimately linked to whether the next phase of state-building in Iraq will succeed.