Michael Rubin | Commentary Magazine

More often than not, when Iraqi Kurdistan enters into U.S. discussion, it is simply in terms of its status as a U.S. ally and frontline force against the Islamic State. Of course, every so often, the human-rights abuses of its leadership will make international headlines, for example when the security forces run by President Massoud Barzani’s eldest son Masrour apparently decide to kill a young journalist for the crime of penning a poem condemning Barzani family nepotism. An appreciation for irony, it seems, is not a Barzani family trait.

But with the Islamic State threat checked, at least for the moment, a larger problem now threatens Iraqi Kurdistan which, alongside Israel and the Gulf states, appears the last bastion of stability in the Middle East. And it is a problem of its own making: poor governance, corruption, and bureaucratic bloat. While high oil prices enabled regional governments to avoid reform, and short-term exigencies led Kurdistan’s allies to turn a blind eye toward its internal problems, sustained low oil prices have now contributed to a crisis which increasingly few inside or outside Kurdistan can or should ignore.

Kemal Chomani is among the most talented Kurdish journalists of his generation. Writing in the Kurdistan Tribune, Chomani notes that Iraqi Kurdistan is now $17 billion in debt:

The KRG has been undergoing severe financial crises for a year. Qubad [Talabani, son of the former president] forgot that KRG debts have reached 17 billion dollars. State employees are not getting their monthly salaries…. So surprisingly, and unashamedly, he said they have been able to manage paying employees’ wages by “begging”. He clearly degrades the dignity of our nation. He should tell us where they have begged for us. Is it their duty to beg or work? In the meantime, securing loans from the oil companies, their own companies and Turkey doesn’t mean they have been successful in resolving financial crises. As Mala Yasin, chief of Dealers of Kurdistan, has said, due to the financial crises more than 300,000 KRG workers have been made redundant. In the past three years, thousands of students have graduated from universities and yet you can hardly find one who might have got a job. Even though there’s no statistics to show the real unemployment rate, by having just a few conversations with the youth in the streets one can easily realize how high it is in the Kurdistan region.

Such indebtedness is especially curious given how, according to analysis by Kurdistan Tribune editor Harem Karem and Chomani, Kurdistan has reaped at least $100 billion in the last few years alone. Where this money has disappeared to is unclear, although some senior Kurdish officials have become fabulously wealthy.

In my last several trips to Iraqi Kurdistan, friends from across the Kurdish political spectrum have complained that salary payments are months in arrears and rumors abound that the Kurdistan Regional Government had late last year taken out a $500 million loan simply to make payroll. So what is the regional government’s response, even as oil prices plummet? According to Chomani, writing on his Facebook page, the Kurdistan Regional Government’s Finance Ministry has announced the addition of 5,000 members of the Patriotic Union of Kurdistan (Talabani’s party) to the state payroll, even though they work in party and not state offices. This would be analogous to President Obama deciding to add Democratic party operatives continuing to work in offices belonging to the Chicago Democratic Party to the federal payroll, without actually requiring them to take federal jobs or abandon their party activist role.

Against the backdrop of Iraqi Kurdistan’s financial woes, investor confidence is taking a hit as corruption scandals which the Kurdistan Regional Government (KRG) would just assume ignore wind their way through foreign courts. The most recent case involving oil deals comes from Korea, where the Korea National Oil Corporation (KNOC) operations in Kurdistan have now become the stuff of recrimination, blackmail by the KRG, and revelations in South Korea about bribery allegedly involving a $31.4 million “signing bonus” for the Kurdish oil minister Ashti Hawrami.

Certainly, Iraqi Kurdistan is not alone in facing an unprecedented budget crisis, or in being hampered by corruption, although unrestrained KRG corruption makes for a poor comparison with Dubai, other Gulf States, or even Morocco, where other investors might look. The unwillingness of the government to address the problems—there was a fistfight in parliament the other day when an opposition parliamentarian raised questions of rule of law regarding the president’s extra-constitutional extension of term—raises question about what can be done.

Iraqi Kurdistan is too important to write off, but the tendency of former U.S. officials and perhaps current diplomats as well simply to sing the region’s praises does more harm than good. If Kurdistan is to remain stable, and if its leaders truly seek to continue down the democratic path, then it is time for a no-nonsense approach to governance and a serious response to corruption. Too many countries with oil have assumed they are indispensable to the world’s voracious energy appetite, only to realize that corruption, organized crime, and insecurity can do an investment in. Kurdish officials may feel two out of three isn’t bad. They’d be wrong.

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