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Oil for soil: A grand bargain on Iraq and the Kurds

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Kirkuk/Brussels, 28 October 2008: Rising acrimony over disputed territories will undermine still fragile progress in Iraq unless a package deal is reached over oil, revenue sharing, federalism and the constitution.

Oil for Soil: Toward a Grand Bargain on Iraq and the Kurds,* the latest report from the International Crisis Group, offers a bold proposal for resolving the long-festering conflict over Kirkuk and other disputed territories that threatens to disrupt Iraq's relative peace.

"In its ethnically-driven intensity and its ability to drag in regional players such as Turkey and Iran, the Kirkuk issue can have a devastating impact on efforts to rebuild a fragmented state", says Joost Hiltermann, Crisis Group's Middle East Deputy Program Director. "This conflict potentially matches or even exceeds the Sunni-Shiite divide that spawned the 2005-2007 sectarian war".

Despite some progress, Iraq's legislative agenda is bogged down primarily by a dispute over territories claimed by the Kurds as historically belonging to them - territories that contain as much as 13 per cent of Iraq's proven oil reserves. Stymied in their quest to incorporate these territories into the Kurdistan region by constitutional means, due mainly to the suspicions of Iraq's Arab majority that their real goal is independence, Kurdish leaders have signalled their intent to hold politics in Baghdad hostage. At the same time, the Iraqi government's growing military assertiveness is challenging the Kurds' de facto control over the territories.

The current piecemeal approach should be discarded in favour of a grand bargain involving all core issues: Kirkuk and other disputed territories, revenue-sharing and the hydrocarbons law, as well as federalism and constitutional revisions. A sober assessment of all sides' core requirements suggests a possible package deal around an "oil-for-soil" trade-off: in exchange for at least deferring their exclusive claim on Kirkuk for a decade, the Kurds would obtain demarcation and security guarantees for their internal boundary with the rest of Iraq, as well as the right to manage and profit from their own mineral wealth.

This package demands painful concessions from all sides, which they are unlikely to make without strong international involvement. The UN mission (UNAMI) will need stronger backing from the U.S. and its allies. Washington should make it a priority to steer politicians toward the grand bargain, while securing it through political, financial and diplomatic support.

"There is little time to waste. As U.S. forces are set to draw down, Washington's leverage will diminish, as will chances for a workable deal", warns Robert Malley, Crisis Group's Middle East & North Africa Program Director. "The likeliest alternative is a new outbreak of violent strife over unsettled claims in a fragmented polity governed by chaos and fear".

Contacts: Andrew Stroehlein (Brussels) +32 (0) 2 541 1635

Kimberly Abbott (Washington) +1 202 785 1601