The New York Times | Oct. 8, 2018

No end is in sight in the fight over control of the oil-rich region of Iraq.

In an election that did not capture the attention of most of the world, residents of the semiautonomous Kurdistan region of Iraq voted in a parliamentary election last Sunday — a year after a failed vote for independence. The election, whose results have been hotly debated, is the latest chapter in the long and tortured struggle over control of the oil-rich region.

The Times talked to Janine di Giovanni for an update on the conflict in Kurdistan and its meaning to the oil and gas industries. Ms. di Giovanni is a senior fellow at the Jackson Institute for Global Affairs at Yale University. She has worked for over 30 years as a reporter in conflict zones in the Balkans, Africa and the Middle East. Her most recent book, “The Morning They Came For Us: Dispatches From Syria” has been translated into 26 languages. The conversation has been edited and condensed.

What makes Kurdistan — and Kurdish oil — so important?

Kurdistan is crucial because of its vital location — straddling Iran, Syria, Turkey and Iraq. Ever since the Kurds were denied their own state after World War I, they have been focused on a search for self-determination. The Kurds’ key leverage is oil: Kurdistan has roughly one-third of Iraq’s total oil reserves, much of it located under the sands near the city of Kirkuk, which was once a stronghold of the Islamic State in Iraq and Syria (ISIS.)

Kurdistan’s neighbors — with their own restive Kurdish minorities — worry that oil will fuel the Kurdish push for independence from Iraq. Kurdish autonomy, they fear, would destroy the already precarious equilibrium in the region. Kurdish statehood is the last thing the Iranians, the Turks and the Iraqis want.

Less than a decade ago, Kurdistan was being heralded as the new Dubai. What happened?

Well, first and foremost, the Islamic State happened. Although ISIS (also known as ISIL, for the Islamic State of Iraq and the Levant) was years in the making; by late June 2014 its impact on Kurdistan was huge. I was in Baghdad back then and recall the media reports that ISIS fighters were within 30 miles of Irbil, the capital of Iraqi Kurdistan. Having fighters so close terrified the oil expatriates who had gone to Kurdistan and turned it into a petroleum boomtown. The parties ended. The construction stopped. Shopping malls and the high-rise apartments were left half built as oil prices plummeted.

In short, Kurdistan’s economy was hit by the financial and humanitarian costs of the war against ISIS and a collapse in business confidence. This led to an exodus of international oil companies and other key investors. The result was a severe financial crisis from which the region has yet to recover. Oil prices have bounced back, but it has become clear that Kurdistan’s oil reserves were overstated and that the region’s production is not sufficient to cover its operational costs.

How did the failed independence referendum impact Kurdistan’s oil output, and what’s the situation like now?

The 2017 referendum was catastrophic in terms of the Kurdish economy and oil production. Shortly after 92 percent of Kurds voted to leave Iraq, Baghdad and the regional countries responded harshly. The most brutal response was that the disputed oil producing city of Kirkuk fell to Iraqi forces. The city was taken out of the Kurds’s hands after they had fought a hard battle to liberate it from ISIS. It was a bitter humiliation, a political suicide for Kurdish leader Masoud Barzani, who resigned. But most of all, it denied the Kurds of the Kirkuk oil.

What’s keeping Kurdistan from reaching its full oil-production potential?

In my view, there are two key factors going on. The first is corruption, which is endemic to the region and embedded in the society. Then there’s Kurdistan’s complex internal politics; chiefly between the main Kurdistan Democratic Party (K.D.P.) and the Patriotic Union of Kurdistan, as well as with smaller fringe groups. Those two major parties, who’ve both been accused of graft, each look in different directions for patronage and support. The P.U.K. to Tehran, while the K.D.P. is traditionally more aligned with Baghdad, the United States and Western-aligned regional countries. And these rivalries have important petroleum implications.

How so?

Take a recent 2016 export agreement. Two years ago, as internal political rivalries worsened within Kurdistan, its regional government (officially the Kurdistan Regional Government or K.R.G.) and Baghdad agreed to export 150,000 barrels of oil per day through Kurdish pipelines to the Turkish port of Ceyhan. The resulting revenue was to be shared by both governments and marked an important new era in relations between the Iraqi and Kurdish leaders. Yet the agreement only exacerbated internal Kurdish tensions. The P.U.K. accused the K.D.P. of lacking transparency; the K.D.P. accused the P.U.K. (who had always been close to Tehran) of selling Kirkuk’s oil via trucks to Iran, and keeping the money for themselves.

Are you optimistic about the future of Kurdistan to ultimately develop as both a nation and major oil producer.

I would like to be, because I love Kurdistan — I love Iraq. I’ve been working there since the time of Saddam Hussein. But signs are not positive. In January, the United States Institute of Peace issued a report that said that Kurdistan was on the brink of “economic collapse.” A rapid solution is needed, and will most likely have to come from the central government in Baghdad, to reassure investors that they are needed to rebuild Kurdistan after ISIS tore it to shreds. The only way for that to happen is for the two to renegotiate Kurdish oil policy and revenue sharing in terms of the Iraqi national budget. That is the core of it.

In terms of Kurdistan becoming independent, the country must develop core institutions which they have failed to do — there must be rule of law and transparency and the level of corruption must be crushed. Both Baghdad and Irbil point fingers and offer accusations, but the lack of transparency is at the core of the distrust.

Iraq has a Kurdish president, Barham Salih, as part of the new government in Baghdad. How might this new leadership change things?

The post of president is largely ceremonial and always goes to a Kurd under an unofficial agreement following the fall of Saddam Hussein. Mr. Salih is a moderate Kurd and former P.U.K. deputy, and there is hope in him; following his election, the Iraqi foreign minister spokesman, Ahmed Mahjoub, announced, “Iraq is starting a new phase, a new era.” Mr. Salih is a British-educated engineer and an avid supporter of higher education for the young, which is desperately needed to get the economy back on track. Mr. Salih is also well-regarded in Washington.