After months of horse trading and wrangling, the Iraqi Parliament approved a contentious three-year budget on June 12. The budget for 2023 secures a record-breaking 153 billion dollars to fund Iraq’s growing public sector, development projects, and infrastructure. Although Kurdish-Arab disagreements over the rights and obligations of the Kurdistan Regional Government (KRG) in the budget stymied parliamentary sessions for a few days, internal Kurdish divisions eventually aided Shia and Sunni factions in weakening the Kurdistan Region's financial independence. This effectively brought the KRG under federal authority, ushering in a new era of Erbil-Baghdad relations.

The Kurdish Role in Post-2003 Iraq

Since 2003, the Kurdistan Region of Iraq (KRI) has gained a considerable degree of autonomy and political influence within the country. Indeed, the Kurds have been active participants in Iraq's new political landscape since the very beginning, getting heavily involved in the drafting of the new Constitution and ultimately shaping the political system in Iraq. They have held significant positions in the federal government and have been involved in the negotiations for and formations of various governments over the years. The ceremonial Iraqi presidency post has traditionally been reserved for Kurds.

Militarily, the Kurdish Peshmerga forces were instrumental in the U.S.-led invasion of Iraq in 2003. As ISIS moved in in 2014, Peshmerga forces actually gained territory and economic resources by extending their control over the oil rich province of Kirkuk after federal Iraqi forces abandoned their posts. The Peshmerga effectively repelled the Islamic State from Kirkuk, and later took part in offensives to drive the extremist group back. They were lauded as the fighting force on behalf of the world. 

In addition to dealing with these political and military problems, the KRG has actively developed its economy over the last several years, luring international capital and forming business alliances. It significantly expanded its hydrocarbon industry and exported 450 thousand barrels of oil daily until March 2023. As a result, Kurdish-controlled areas were the most prosperous part of the country. Even despite the recent economic setbacks and the inability of the KRG to pay civil servant salaries—in addition to the wealth disparity underlying the region’s economic development—Kurdistan’s poverty rate remains the lowest across Iraq. 

Kurdish Divisions Under the Surface

The KRG seems to possess all the characteristics of a sovereign state except for any official international recognition. It even made an attempt to obtain complete sovereignty in 2017 by holding a highly contentious independence referendum. However, this referendum resulted in significant geographical, political, and economic losses and exacerbated the internal rifts hiding under the surface of the KRG’s apparent successes. 

Politically, the historic power struggle between the two ruling parties—the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK)—has only gotten worse in recent years. Efforts by Western diplomats, including Assistant Secretary of State for Near Eastern Affairs Barbara A. Leaf, to encourage the two parties to restore a functional relationship have only brought temporary relief. As soon as Western guidance is removed, every deal is followed by a significantly more serious dispute between the KDP and the PUK. This reality reveals a harsh truth: internal Kurdish peace is dependent on a determined and consistent foreign whip. 

The irony is that Kurds are adept at bringing rival foreign powers together, but awful at handling their own internal differences. Case in point, KRG President Nechirvan Barzani is credited with mediating the phone call between then UAE Crown Prince Mohammed bin Zayed and Turkish President Recep Tayyip Erdoğan, which resulted in the normalization of diplomatic relations between the two nations. Though Barzani, to his credit, has summoned the Kurdish parties and gone the extra mile to try to bridge political gaps within Kurdistan, his initiatives have been impeded by the complete lack of trust introduced by deeply individualized politics. These tribal politics are so bad that each party is hell-bent on bringing the other down, regardless of the consequences for Kurdistan.

As a result, the internal divisions have undermined Kurdistan’s autonomy against the federal government. These inter-party conflicts have weakened Kurdish collective bargaining power and have hampered the Kurds’ ability to present a unified front in negotiations with the federal government. Internal schisms have also resulted in a lack of cohesive decision-making, making it impossible for the autonomous region to effectively advocate for its autonomy and assert its budgetary needs. Shia parties in the Coordination Framework used such splits to gain more control and influence over the region's finances, especially in the newly-approved Iraqi budget law.

The subservience of Kurdish power did not stop with the loss of Kurdistan's entire oil industry. Every dollar given to Erbil is now subject to rigorous federal audits, and the KRG Prime Minister's authority over how money is spent is now under the jurisdiction of the Iraqi Federal Government and the Federal Board of Supreme Audits. As retaliation for being sidelined by the KDP financially, the PUK faction in Baghdad worked diligently to make the Iraqi Prime Minister the arbitrator in the event of a Kurdish internal fight over financing. It remains to be seen whether the Prime Minister will use his legal right to engage in internal Kurdish affairs. 

The Kurdish parties' failure to rise to the occasion has diverted focus and resources away from governance and development, jeopardizing the region's potential to construct strong institutions and efficiently govern itself. It has undermined the KRG’s credibility and standing on national, regional, and international levels. Even throughout the budget debate, which was crucial to the economic viability of the region, the Kurdish parties failed to devise a well-balanced policy. Their finest strategy was to bite their nose in order to spite their face. As a result, the Kurdistan Region is weaker than ever before, and its future is uncertain.

The KRG institutions have lost their legitimacy not just in the eyes of the people but also from the legal perspective after the Iraqi supreme court ruled that the extension of the Kurdistan Region’s parliament tenure was unconstitutional. 

Now, the Kurdistan region needs to hold an election to restore public and legal legitimacy. In addition, such an election could reset all political tensions and conflicts between the Kurdish political parties.

While a fresh election cannot guarantee national unity, it can provide an opportunity to foster trust, encourage dialogue, and increase citizen participation. The election can also help build a sense of unity and shared purpose provided it is fair and clean. For this to happen, the political field in Kurdistan must be leveled through a new political pact backed by the KRG's foreign patrons. This demands more American and European diplomatic engagement than ever before, despite their sense of diplomatic fatigue. In the event of a Western diplomatic vacuum, China and other western adversaries could seek to fill in the gap. Washington must not allow Beijing another diplomatic win in the Middle East.

Washington Institute for Near East Policy