Brandon Wallace is a policy wonk who spends his time watching Iraq, Kurdish borders, data, and conflict in the Middle East of all varieties. Brandon can be found on Twitter at @brandonwallacex and at his website www.brandonlouiswallace.com. Divergent Options’ content does not contain information of an official nature nor does the content represent the official position of any government, any organization, or any group.

National Security Situation: As the defeat of the Islamic State of Iraq and Syria (ISIS) looms closer and the Kurdistan Regional Government of Iraq (KRG) ponders its future relationship with greater Iraq, the United States must decide what, if any, military assistance it will provide to the Kurds.

Date Originally Written: July 7, 2017.

Date Originally Published: July 10, 2017.

Author and / or Article Point of View: This options paper is written from the hypothetical perspective of a senior policy advisor for a policy maker in the United States government.

Background: The KRG, a semi-autonomous region in Northern Iraq with intentions of secession, requires both intrastate and external sponsors to sustain functionality. The KRG depends on resource allocations from the central Government of Iraq (GOI) in Baghdad, as well as assistance from the United States and other international partners. The campaign to defeat ISIS requires a functioning KRG partnership, resulting in several partners providing additional capital and arms to the region. Without such assistance, the KRG faces serious economic turmoil. The GOI allocates 17 percent of the federal budget for the KRG, yet the budget does not balance KRG spending. The KRG carries an inflated public sector wherein 70 percent of KRG public spending is devoted to payroll[1]. The KRG must also support internally displaced people (IDP). This year, KRG debts exceeded US$22 billion[2].

Moreover, the KRG cannot sustain itself through oil sales. It is estimated that the maximum output of KRG oil production is nearly 800 kbd (Thousand Barrels Per Day)[3]. To balance the budget, the KRG would need oil to sell at nearly US$105[4]. Today oil trades at roughly US$50.

Significance: The KRG’s ability to receive independent assistance from the United States has profound implications for the United States’ relationship with the GOI, Kurdish commutes in Iraq, Iran, Syria, and Turkey, and relations between neighboring states. Yet, the KRG has been a valuable non-state partner in the fight against ISIS. The United States paid the KRG Ministry of Peshmerga Affairs (the military forces of the KRG) US$415 million for their role in the Mosul Operation to topple ISIS- this does not include military equipment and other forms of aid from the United States and international partners[5].

Option #1: The United States sustains its current level of military assistance to the KRG.

Risk: This option risks dissatisfaction with bordering countries of the KRG. Sustained support implies United States complicit backing of the KRG to the GOI, Iran, Turkey, and a significantly crippled Syria. Further, military assistance, specifically cash payments from the United States, contributes to the bloating KRG payroll.

Gain: The KRG will continue to be an important partner in the campaign against ISIS. As ISIS is driven out of its controlled territories, a well-supported Peshmerga and other Kurdish forces will be necessary for security operations post-Mosul. No allied actor is so upset by United States support of the KRG as to dramatically obstruct the campaign against ISIS. Option #1 carefully mitigates the reservations of other actors while accelerating counter-ISIS operations.

Option #2: The United States diversifies and increases its assistance to the KRG.

Risk: Significantly increasing independent assistance to the KRG, without involving the GOI, will likely be met with open hostility. If the United States increases its support to Kurdish groups, anxious governments with Kurdish minorities may attempt to undermine United States’ interests in retaliation.

Conversely, the United States may choose to diversify its assistance to the KRG by changing its lending model. Last July, an International Monetary Fund loan of US$5.25 billion conditionally reserved US$225 million for KRG road infrastructure and small projects[4]. However, adopting this model, setting conditions for KRG sharing with the GOI, opens the United States to risks. The KRG may not have the stability to repay a loan, and it is likely the GOI, who may be better positioned to pay off the loan quickly, will insist on the KRG meeting a 17 percent repayment share. The symbolism of any conditional loan or military transfer to the KRG will certainly strain relations with the GOI.

Gain: United States’ Foreign Military Sales (FMS) and Foreign Military Assistance (FMA) programs in Iraq require the approval of the GOI, even when agreements are specifically directed at the KRG. Per United States law, the FMS and FMA are limited only to interaction with central governments. To secure large-scale military sales directly to the KRG would require a congressional change to existing United States’ laws. Option #2 would surely win the favor of the KRG, and it may expedite counter-ISIS operations across northern territories. Expanding the scope of assistance to the KRG by lending conditionally or giving conditionally to the GOI, could force Erbil, capital of the KRG, and Baghdad to broaden collaboration in developing the Iraqi Security Forces (ISF). Option #2 ensures the KRG does not return to relative isolation from the international community in a post-ISIS future.

Option #3: The United States ceases all military assistance to the KRG and relies on the GOI to allocate resources.

Risk: This option to cease assistance to the KRG may hinder security operations in Northern Iraq, and it diminishes the United States’ presence in the region- a vacuum other countries may fill. For example, this option will certainly please Iran. Conversely, the KRG will likely interpret this move as aggressive.

Gain: Providing the GOI full authority in distributing assistance communicates a strong faith in the central government and the Iraqi state. Further, this consolidation of assistance to a single power center in Baghdad may simplify bureaucratic procedure and empower the ISF.

Other Comments: None.

Recommendation: None.

Endnotes:

[1] Coles, I (2016, February 16) Iraqi Kurdish deputy PM says deal with Baghdad ‘easy’ if salaries paid. Retrieved June 06, 2017, from http://www.reuters.com/article/us-mideast-crisis-iraq-kurds-idUSKCN0VP22Z

[2] Natali, D (2017, January 3) Is Iraqi Kurdistan heading toward civil war? Retrieved June 7, 2017, from http://www.al-monitor.com/pulse/originals/2017/01/kurdistan-civil-war-iraq-krg-sulaimaniya-pkk-mosul-kurds.html

[3] Jiyad, A. M (2015, July 7) Midyear Review of the State Budget and Oil Export Revenues. Retrieved June 5, 2017, from http://www.iraq-businessnews.com/wp-content/uploads/2015/07/Ahmed-Mousa-Jiyad-Mid-Year-Review-of-the-State-Budget-and-Oil-Export-Revenues.pdf

[4] Grattan, M (2017, June 25) David Petraeus on US policy under Donald Trump, the generational war against Islamist terrorism, and dealing with China. Retrieved July 7, 2017, from https://theconversation.com/david-petraeus-on-us-policy-under-donald-trump-the-generational-war-against-islamist-terrorism-and-dealing-with-china-80045

[5] Knights, M (2016, July 28) The U.S., the Peshmerga, and Mosul. Retrieved June 6, 2017, from http://www.washingtoninstitute.org/policy-analysis/view/the-u.s.-the-peshmerga-and-mosul