Futuristic Readings No.5 -2020
The Future of Dialogues and Agreements
Trilogy of Erbil – Baghdad – Washington
The Opportunities and Constraints
– Futuristic Readings No.5
– Researchers: Dr. Yousif Goran, Dr. Omed Rafiq Fatah, Dr. Abid Khalid Rasul, Dr. Hardi Mahdi Mika
– Centre for Future Studies – Sulaimani – Iraqi Kurdistan Region
– June 2020
Section One:The Future of Erbil-Baghdad Agreement.
Section Two:Negotiations between Iraq and the United States.
Kurdistan Region of Iraq, the Federal Iraq and the United States are currently engaged in a series of discussions over the restructuring of their relationships, agreements and roles in Iraq and the Middle East. For this reason, Iraq has seen two rounds of discussions (Erbil – Baghdad) dialogues and (Baghdad – Washington) negotiations. Whether these talks are successful or not, their results will likely have local, regional and international political, military and economic consequences. The significance of the multiple crises currently being experienced by both Baghdad and Erbil makes it important for a thorough examination of the discussions and dimensions of these talks. While both agreements are different cases and separate from one another, their contents, reasons and conclusions are intertwined. Whatever the intended purpose of the agreements, they will undoubtedly have the greatest impact on the future policies of the governments in Baghdad and Erbil and affect the everyday lives of the residents of Federal Iraq and Kurdistan Region of Iraq (‘KRI’).
This time Ranan investigates and discusses the dimensions, obstacles, opportunities and future scenarios of both the Erbil-Baghdad and Baghdad-Washington agreements.
Section One:The Future of Erbil-Baghdad Agreement
The background of Erbil-Baghdad dispute:
Rivalries and disagreements between a federal government and its regions are normal and expected. Hence, in Iraq, where the transition from a unitary autocratic and centralized state to a federal state is only in its 15th-year rivalries and disagreements are arguably more natural. What is abnormal for Iraq is that the disagreement between the federal government and the regional government remain unresolved with the search for resolutions constantly being postponed. The lack of resolutions to outstanding problems between Baghdad and Erbil, such as the ongoing issues around the management and sale of Iraq’s natural resources, Iraq’s disputed territories, the military, and Iraq’s finance and budget dossiers have been a defining feature of the Baghdad – Erbil relationship since the implementation of the Iraqi constitution in 2005.
States with a federal governance model often have in place mechanisms to resolve disputes between the federal and regional governments. Such mechanisms include coordination through the national federal council (the second chamber of parliament), constitutional amendments, federal courts, two-party discussions, political agreements, referendums and elections. Where these mechanisms fail to resolve an issue, either conflicting party can declare a state of emergency or declare independence and secession. What is concerning in the disputes between Baghdad and Erbil is that many of these tools have either already been exhausted or are by their nature unusable. The only mechanism that remains to arbitrate between the two sides is the holding of talks and the reaching of bilateral agreements. In this respect, Baghdad and Erbil have, to date, engaged in many rounds of talks and negotiations over the unresolved issues between them; however, talks have consistently failed to deliver a final settlement or solution. The latest round of talks between the two governments, which continues to date, began with the formation of the new cabinet by the new Iraqi Prime Minister Mustafa Al-Kadhmi. The latest talks concerned the provision of salaries for state sector employees in the KRI.
The latest points of discussions between Erbil and Baghdad:
The origins of the current dispute between Baghdad and Erbil over the provision of salaries for state sector employees in KRI by the Iraqi Federal Government are as old as many of the other outstanding issues between the two sides. However, the emergence of the current dispute dates back to early 2020, when the Kurdistan Regional Government (‘KRG’) asserted that it was no longer able to meet the conditions of its ‘oil for salaries’ agreement with the Iraqi Federal Government (‘IFG’). The agreement arranged that the Kurdistan Regional Government handover 250,000 barrels per day (‘bpd’) of Kurdish oil to the Iraqi national oil company (SOMO) in exchange for a boost in the KRI’s share of the Iraqi national budget to cover the payment of the salaries for state-sector employees in KRI. The KRG’s argument was that between 2014 and 2018, the IFG had not provided it with its constitutionally allocated share of the Iraqi budget. Further to this, the Kurdish government argued that the share of the budget that the IFG did send it in 2019 was not enough to pay the salaries of the region’s state sector employees. KRG has also informally told IFG that it owes the region almost $400 billion for the following reasons:
- Compensation for the humanitarian, environmental, infrastructural and property damage inflicted on KRI by the Iraqi government between 1963 and 2003;
- Compensation for the KRI’s hosting of Iraqi internally displaced peoples (‘IDP’) during the country’s war against the Islamic State group between 2014 and 2019;
- Compensation for the KRG’s provision of natural resources to develop Kirkuk’s electricity infrastructure between 2011 and 2020; And,
- Compensation for damages emanating from the non-payment of the KRI’s state sector salaries.
In contrast, many of the non-Kurdish political parties that make up IFG argue that KRI received approximately 12% to 13% of the Iraqi national budget annually in previous years without shouldering on any of its national financial responsibilities. Instead, they argue that KRI was independently exporting 400,000 BPD or Iraq’s Kurdish oil to international markets through Turkey without authorisation from IFG. Further to this, some political parties in Iraq are calling for KRG to be held liable for damages that its unilateral actions have caused to the national economy, which Iraq’s national integrity commission estimates at $128 billion.
It is these opposing positions on the part of Baghdad and Erbil that have caused the current six-month stalemate in talks between Baghdad and Erbil and leaving state sector employees in KRI with only one month’s salary payment since January. However, even as both sides become further entrenched in their negotiating positions, talks have not collapsed. Instead, since the formation of the new IFG, the new Iraqi Prime Minister Mustafa Al -Kadhmi has reiterated his willingness to continue talks with KRG to resolve the outstanding issues between Baghdad and Erbil. For its part, KRG has declared that it is willing to provide SOMO with the 250,000 BPD of Kurdish oil that Baghdad had previously requested.
Therefore, the aims of KRG in the current talks is to secure its share of the 2019 and 2020 Iraqi national budgets and also to secure an agreement from IFG to pay an agreed percentage of the salaries of state-sector employees in KRI. In contrast, the IFG’s aims in the talks are to force KRI to cede control of Kurdish oil exports to SOMO, which Erbil has refused to do to date. As such, IFG is demanding that the authorities in Erbil should hand over the Kurdish oil exports from the last year in which they have not paid it to SOMO till now which is a condition to be done before signing any agreements with KRI. In case of reaching any new agreements with KRI, IFG requires KRI to hand over all incomes which are received from the sale of Kurdish oil and customs payments, its border crossings and airports to Baghdad in return to any of the KRI’s share received from the Iraqi national budget.
While an agreement presents opportunities for both Baghdad and Erbil, the timing of the talks in the midst of economic crises in both jurisdictions caused by the collapse of international oil prices resulting from the COVID-19 pandemic makes the prospect of reaching a mutually acceptable agreement difficult.
The opportunities for agreement between Erbil and Baghdad:
While the current economic state of both Erbil and Baghdad does not serve the prospects of an agreement being reached between the parties, there are a number of opportunities that an agreement can offer to both sides, which have worked to keep both Baghdad and Erbil around the negotiating table.
The opportunities for KRI:
- The economic crisis and the slow motion of the effectiveness of reform steps made Erbil to be in an immediate need for a quick financial aid to pass this crisis which left the political and social affects and made the people mistrust the governmental establishments.
- The deactivation of Kurdistan Regional Government cabinet is the reflection of the participated political parties which they are not cooperated for the reform steps and not supporting the government. They do not have a national and general roadmap for the reform which was approved by the government and the parties. In this regard, KRG is in immediate need for the political support from the Federal government.
- The regional status: this is a real threat for Kurdistan Region and made the region to be in need for the Iraqi constitution and its commitments. This only can be done through approaching Baghdad and these steps will help to calm the threats of Turkey and Iran on Kurdistan Region which are made via their cooperation.
- Laying down the base of the steps for reaching the agreements with Iraq on those dossiers and other pending issues and in particular solving the issues of the disputed areas.
The opportunities for IFG:
- The Iraqi political rivalries and the hegemony of the Iraqi militias over Iraq make the Iraqi new cabinet and Mustafa Al-Kadhmi, personally, require political assistance and the security forces from KRI. To successfully implement reforms and prevent the growth of and defeat corruption, both Baghdad and Erbil require cooperation from one another. Such cooperation would allow both governments to implement their respective government reforms (at least) and not succumb to political rivalries and conflicts.
- The current state of the Middle East and the international community coupled with the threat to Iraqi political sovereignty, especially from Turkey and Iran, demands that Baghdad and Erbil work together with a joint political agenda to confront both problems.
- The issue of terrorism and its re-emergence in the Iraqi disputed territories is a problem that is re-emerging. Experience has proved to IFG that without joint efforts and assistance from Peshmarga and other KRI’s security agencies, it will find it challenging to confront the problem. Therefore, to achieve Iraqi security, both Baghdad and Erbil need to cooperate.
- Mustafa Al-Kadhmi is following the wave of anti-KRI sentiment that is spreading across Iraq and the efforts of its neighbouring states to weaken and restrict the strategic importance of Erbil in Iraq and the wider region.
The impediments to an agreement between Baghdad and Erbil:
The COVID-19 pandemic, the state of Iraq’s security, interference from foreign states (in particular from Iran and the United States), Iraq’s internal rivalries, government failure and a lack of services have come together in a perfect storm of problems facing Baghdad. Resolving these issues not only requires time but agreement and deep reforms, which appear to be beyond the ability of the current IFG cabinet and the political agendas of Iraq’s political parties.
At present, the focus of IFG is on confronting the country’s deep economic crisis. The shortcomings of the Iraqi economy reveal the limits of Baghdad’s capabilities and further restricts its ability to reach an agreement with Erbil. In previous years the competing political agendas of Iraqi political parties, Iraqi political rivalries and the political makeup of IFG prevented Erbil and Baghdad from reaching a final agreement on the outstanding issues between them. Furthermore, Baghdad’s withholding of the KRI’s share of the Iraqi national budget in 2014 was on the basis of reducing Erbil’s political influence and restricting its political movements through economic pressure. However, on this occasion the IFG’s cold shoulder towards Erbil and its non-provision of the KRI’s share of the Iraqi national budget is being motivated largely by the IFG’s current economic shortcomings.
To understand why the economy is driving IFG in its dealings with Erbil, a description of Iraq’s economic shortfall over the last few years is necessary. Iraq’s economic problems date back to its 2014 – 2017 economic crisis that resulted from the 2014 crash in international oil prices. To ensure the continued payment of state-sector salaries, IFG borrowed 35 trillion Iraqi dinars from internal sources and 12 billion Iraqi dinars from external sources. Furthermore, to maintain the value of the Iraqi dinar, IFG added to its financial problems by withdrawing approximately $30 billion from its national financial reserves.
But the beginning of the fatal economic crisis in Iraq appeared in 2017. This is because the war against ISIS in that year was about to be ended and the total cost of this was estimated about 88 billion USD. The Iraqi government found the ruins and destructions in those areas which under the controls of the terrorism and were liberated later. This was the reason in which the international community called for the refreshment of the Iraqi economic in three ways: refreshing through the financial grants, financial aids for the refreshment of the economic development as well as the refreshment of Iraqi investments. The main objective for holding Kuwait conference was for getting 100 billion USD for Iraq, but it was not successful and was not able to get one third of that amount.
Iraq has a large public-sector employee base, which is a major contributing factor to IFG’s economic woes as it means that the majority of Iraq’s income is wasted on its payroll. National statistics estimate that until 2016 approximately 9.4 million individuals received some form of payment from the Iraqi state. When compared with the size of the Iraqi population, this figure is unnecessarily high and works to create a toxic national dependency on the Iraqi treasury.
Quantifying the Iraqi economic crisis, the World Bank has estimated that Iraq has a financial shortfall of 29% and as such have forecast a likely financial recession for the country in 2020. Moreover, according to several economic reports, Iraq’s 2020 budget deficit is approximately $48 billion. In comparison, its 2019 budget deficit was approximately $23 billion.
Iraq’s corruption, militia spending, oil revenue waste, lack of control over customs collection at its borders and the hegemony of militias and political elites have further restrained the IFG’s authority. If a comprehensive program of political and economic reform is not implemented, Iraq will fail to resolve these structural problems. Any other resolution it may seek other than reform only promises to sweep Iraq’s problems under the carpet.
Therefore, where in previous years political issues have been the core of the disagreements between Baghdad and Erbil, following Iraq’s new economic crisis and the compounding effect of COVID-19, the disagreements have become economical in nature. Moreover, the fact that Iraq has over previous years been gripped by economic problems, the current state of its finances does not allow space for a reduction in the political and identity-based rivalries between the two sides.
In contrast, the primary obstacles to an agreement for Erbil are the rivalries between Kurdish political parties, the lack of a united position on how to resolve the ongoing problems and the internal divisions within Kurdish political parties. This is compounded by the KRG’s debts and financial obligations to foreign companies that operate in the region, a lack of transparency by the government regarding its finances and economic abilities and Erbil’s lack of trust towards Baghdad.
Scenarios for an agreement between Baghdad and Erbil:
In the context outlined above, three potential scenarios are possible going forward:
- The continuation of disagreements, regardless of the holding of intermittent talks between IFG and KRG. Whenever the opportunity arises for one side to become stronger than the other, they may disregard the support offered to it by the other. For example, some sides in KRI have publicly declared that they view payments from Baghdad as a pragmatic and tactical step and not a wider strategic objective for KRG.
- Talks may result in success, and a comprehensive agreement reached, especially in the context of the opportunities such an outcome presents to both sides as outlined above. However, this outcome requires true determination from both sides and for both Erbil and Baghdad to view one another as permanent partners in a Federal Iraq, the only form of governance in Iraq that promises to preserve coexistence in the country.
- The failure of agreements and the further deepening of disagreements in the context of the obstacles outlined above. This is particularly likely in the event that the economic crisis in KRI worsens and forces KRI to agree to any new conditions demanded by IFG or in the event that the economic crisis in Iraq continues and prevents IFG from taking serious steps to reduce Erbil’s economic burdens.
Section Two:Negotiations between Iraq and the United States:
The nature of Iraq – United States relationship:
The relationship between the United States (‘US’) and Iraq is subject to complexities, difficulties for numerous reasons. The bilateral relationship was founded on the basis of two strategic and security agreements. The first agreement was known as the Status of Forces Agreement (‘SOFA’) and covered the withdrawal of US Forces from Iraq by 2011. The second agreement, known as the Strategic Framework Agreement (‘SFA’), was founded on the archives submitted to the United Nations Security Council on 25, June 2014 and 20, September 2014. Following the assassination of General Qasim Sulaimani in Baghdad, on 11, June 2020, the US and Iraq have entered new talks to implement a clearer and more legal strategic framework. The talks aim to achieve and multilevel agreement between the two sides covering several different issues, however, the main aim of the talks appears to be Iraq’s security.
Points of discussion between Iraq and US:
According to their agenda and the post-meeting publication from the Iraqi Ministry of Foreign Affairs after the first round of talks, the points of discussion were the following:
- Politics:More attention will be given to talks regarding US support for the new IFG cabinet, political reform and respect for Iraqi sovereignty;
- Security:Security is one of the central talking points between Baghdad and Washington. According to some experts, the aim of these talks is for both sides to reach a comprehensive agreement on the issue of security. After the difficulties and tensions that arose between IFG and some parties within the Iranian backed Iraqi Popular Mobilization Forces (‘PMF’), especially as a result of the assassination of Qasim Sulaimani and Abu Mahdi Muhandis, the United States increased its military presence in Iraq to 5,600 troops and handed over four of its military bases to Iraqi forces siting an increased threat level against US interests in Iraq. Moreover, other security issues to be covered in the talks include; the provision of US military training for the Iraqi army, the risk posed to Iraq and the international community by the Islamic State groups resurgence, especially after the group’s re-emergence in the Iraqi disputed territories, military equipment remaining in the hands of the Iraqi state through the integration of the Iraqi militias into the formal Iraqi security apparatus, US arms sales to Iraq, the establishment of a defensive system in Iraq and discussion on a framework for US forces to remain in their bases in Iraq.
- Energy and the economy:this taking point focuses on Iraq’s current economic crisis that was caused by the COVID 19’s negative impact on the international oil price, economic reform and reducing Iraq’s dependency on single import source for its national energy needs by diversifying its international trading partners to also include Saudi Arabia, especially in the export of natural gas.
- Culture:this point covers increased US engagement with Iraqi universities, the return of the Iraqi Baathist archives from US and to return Iraqi heritage pieces and artefacts that were taken from Iraq following the 2003 US invasion of the country.
Objectives of Iraq – US talks:
The primary objective of these talks is to reach a comprehensive agreement between Baghdad and Washington that will work to build a stable bilateral relationship going forward. The two sides aim to hold comprehensive discussions on each talking point to leave no scope for future arguments around those issues. While both sides undoubtedly have individual objectives in the talks, here only the most important bilateral objectives have been laid out.
- Political objectives:For both sides, the establishment of a strong and sovereign IFG with minimal influence from neighbouring states is a shared objective. For Iraq, this is a primary objective as the country has at present become an arena in which the rivalries between regional and international states play out. Reaching an agreement with the US may present Iraq with a gateway to seek similar agreements with Turkey and Iran to restrict their interference in Iraqi political and security affairs. To restrict Iranian interference in Iraq, the United States is working to counter Russian and Chinese interference in Iraq. Furthermore, there is a particular concern in US at Chinese attempts to get a foothold in Iraq and Syria. Both Baghdad and Washington are also eager to take steps towards transparent elections without any interference.
- Military and security objectives:The geopolitics of the Middle East puts Iraq at the heart of regional security, especially in respect to Iran, Saudi Arabia, Israel and Turkey and as such Iraq can present a threat to these each of these nations. Therefore, to ensure a balance in security and military risk, both US and Iraq require a concrete agreement on security and military affairs. In its discussions, US has openly stated that it intends to reduce its military presence to four or five military bases depending on the outcome of the talks and it intends to reduce this further once Iraq is able to provide for its own security and military needs. The United States is concerned that a full and immediate withdrawal will put its interests in the country under immediate threat, similar to the threat posed to its interests in 2014 with the emergence of the Islamic State group. Furthermore, US has become increasingly aware that its program of economic sanctions on Iran has not been effective in reducing the influence of Iranian backed militia forces in Iraq. Hence Washington is now seeking an agreement on Iraqi defensive system to force IFG to prevent these militias from interfering in Iraqi governance. For both sides, the motivating factor behind the talks is their joint primary objective of establishing an Iraqi anti-rocket defensive system. For its part, US is concerned that Iraq may begin to look elsewhere for international security partners to replace US if it acts too slowly. It also wants to oblige Iraq to ensure the security of its military bases in Iraq. Lastly, on the regional level, as the relationship between US and Turkey is unstable, Washington wants to increase its presence in Syria and Rojava through Iraq.
- Economic and energy objectives:Iraq’s objective from a potential agreement is to distance itself from any potential economic sanctions that US may impose on it. Following the negative economic fallout of the collapse in international oil prices and COVID–19, Baghdad feels that it cannot withstand any further economic shocks, especially if they are in the form of targeted US economic sanctions. Instead, Iraq hopes that the talks will result in economic support and assistance from the US. Since 2014, the US Congress has earmarked $6.5 billion for Iraq for training programs, arming the Iraqi military, development, returning Iraq’s IDP’s to their homes, and clearing Iraqi minefields. Furthermore, Baghdad hopes the talks will be advantageous in giving it access to its $35 billion that is currently being held in the US Federal Bank, to reduce the burden of its current economic crisis. An agreement may also guarantee the provision of gas and electricity for Iraq from the Gulf States. Such a guarantee is much needed for Iraq given that US has only extended permission for Iraqi non-compliance with US economic sanctions programs in respect to Iranian energy imports for 12 months (since the appointment of Mustafa Al-Kadhmi as Prime Minister). An agreement may also provide scope for increased investment by US companies in Iraq’s energy, electricity and technology sectors, investments that are currently dominated by Iran, which allows it to gain increased hegemony in the country. By taking these investments away from Iran, US will also remove Iran’s last economic pillar that has allowed it to increase its influence in the region.
- Cultural objectives:Through this agreement, US can work to improve the Iraqi education and higher education sectors and form bilateral ties between Iraqi universities and research centres with their counterparts in US. For Iraq, it hopes that an agreement with US will pave the way for the return of Iraq’s political archive’s and its cultural heritage artefacts, the return of which it has been unable to secure from US for the last 17 years. For US, it is important that it is able to convince the international community that its invasion of the country was to help to rebuild Iraq rather than destroy it.
The Kurds and the strategic agreement between Iraq and US:
While this agreement is, in essence, an agreement between IFG (as a state) and US government, Kurdistan Regional Government (‘KRG’), as a legal entity in Iraq and the government of a region hosting US troops also has a stake in the talks.
In 2008, when the framework agreement was signed between US and Iraq, KRG took a back seat and played no role in the talks. At the time KRG was content with not being involved as the strong Kurdish hand in Iraq at the time, with Jalal Talabani as Iraqi President and Hoshiyar Zebari as Iraqi Foreign Minister (both Kurds) and a leading member of the negotiating team, ensured that the KRG’s interests would be protected as these individuals would represent the Kurdish position in the talks. However, the events that have followed the formal withdrawal of US forces in Iraq in 2011, the war against the Islamic State and the 2017 Iraqi military offensive against the KRG’s positions in the Iraqi disputed territories and their subsequent takeover by IFG has worked to raise the nerves and increase the concern of officials in Erbil. In this round of talks, KRG wants to ensure that here IFG is strengthened so too is KRG. Furthermore, Erbil also wants access to any economic, cultural and technological assistance that comes out of this agreement.
In reality, the current status of KRI, compared with its status in 2007 is markedly different. The region’s strategic position is likely weaker than at any point since 2003. The economic crisis in KRI, internal problems and interference by Turkey and Iran has significantly weakened Erbil’s position with respect to Baghdad. This weakened position threatens to establish a new weaker status and role for KRI in any agreement between Baghdad and Washington. However, it must also be noted that the US’s current plan for Iraq is to secure control of Mustafa Al-Kadhmi’s government. Therefore, they will likely welcome Kurdish efforts to secure such an outcome. Furthermore, the current US administration wants to reach an agreement in Iraq that allows them to demonstrate to US voters that the administration has followed through with its plans, strategies and election promises in Iraq.
Hence the most important objectives for KRG is the talks between Iraq and the United States are:
- To receive guarantees that KRI will receive its share of any aid, investment and training that results from an agreement.
- To reduce or stop the interference and violation of the KRI’s sovereignty by neighbouring states.
- To ensure that Iraq opens its borders and markets for the KRI’s internal and foreign imports and exports.
- The establishment of a legal framework that makes the Kurdish Peshmerga a part of Iraq’s new defensive system.
Future scenarios for the talks between Iraq and US:
- The most likely scenario is that the talks will lay the foundations for a comprehensive agreement between Iraq and the US as of Washington has already spent a lot of effort in Iraq. Furthermore, the imbalanced state of the negotiations and the potential advantages compared with the disadvantages for Iraq also serve this scenario. According to analysts if US is able to secure a comprehensive agreement with Iraq, then it will grant the Washington hegemony in Iraq and distance the influence of the US rivals in the county.
- Another potential scenario is that the talks stall due to other issues that both states are currently focused on, such as the COVID-19 pandemic, which has changed the primary focus for the leaders of Iraq and the US. Iraq’s primary concern is the state of its economy and health infrastructure, while the US is focused on the upcoming presidential elections. This scenario threatens to keep relations between the US and Iraq in their present ambiguous state.
- Due to the current state of the Kurdish economy and health sector, the KRI’s current status in Iraq is weak. Hence the idea that KRG will play an influential role in the talks is unlikely. However, Kurdish involvement in the talks is potentially advantageous for US to reach an agreement with Iraq, protect its gains and take advantage of the economic, political and security changes that will result from the agreement.