Oil and the question of federalism in Iraq

The ‘oil question’ in Iraq has traditionally been viewed almost exclusively through the prism of ethno-sectarianism. Disputes over the management and licensing of the hydrocarbon sector and over revenue distribution have been seen as a battle for power between Iraq’s ethnic and sectarian communities, as if these were monolithic entities. This has led to a conviction—especially among US policy-makers in post-war Iraq—that solving the problem lies in a simple formula of apportioning control of the sector to decentralized authorities and dividing revenue proportionally. This view ignores the fact that disagreements over management of the sector and over revenue distribution reflect a deeper dispute that cuts across ethno-sectarian lines. In reality, disputes are driven far more by the as-yet-unresolved issue of whether ultimate sovereign authority in Iraq lies with the central government or should be decentralized to regional and provincial governments. As the main source of revenue in Iraq, control over the oil and gas sector is critical to the success of these rival agendas. Consequently, compromise has been impossible to achieve, and neither side is willing to make concessions for fear of threatening their long-term ambitions.

Tactical maneuvering by different parties in the aftermath of the recent elections may provide some temporary respite to the oil and gas dispute, as Arab leaders in Baghdad seek to co-opt the support of Kurdish parties to form a new coalition government. But an accommodation over the federalism question in Iraq still seems out of reach. This will not only hamper the legislative process and effective government in the coming years, but could also threaten stability, particularly along the fragile border that separates the Kurdistan Region from the rest of Iraq.