A Kurdish farmer tending to his new broccoli farm near Erbil.
2016 is likely going to prove to be another tough year for the Kurdistan Region. Its deputy Prime Minister Qubad Talabani recently warned that the region could be devastated by an “economic tsunami” if it continues on its present trajectory.
In just two years the region’s debt has climbed to $15-18 billion as it has had to struggle with one crisis after another. Its heavy dependence on oil revenues and the over-reliance on most of the population on public sector salaries has seen it take a crippling blow after Baghdad stopped sharing revenues in early 2014 and oil prices dropped from $100 to a mere $30 per barrel in the meantime. Today regardless of whether or not the region exports its oil independently it is not likely to be enough to overcome this current crisis for the foreseeable future. In the meantime salaries need to be paid and eternal threat posed by Islamic State (ISIS) terrorists in a costly war needs to be continually combatted.
Add to this the 1.8 million internally displaced persons that the Kurdistan Region has had to host. No small task for such a small region having to simultaneously deal with a plethora of cumbersome burdens. Burdens and strains which could prove to be too much at a critical time and have a dangerously destabilizing effect on the region and undermine its continued ability to fight ISIS.
Already the Kurdistan Region has plans for reforms. Downsizing the large public sector is one thing that is on the agenda. After this crisis is, soon hopefully, overcome it is doubtful that up to 70% of the population will be counting upon the government to pay them salaries. And down the line the region also has a more reliable resource to exploit which will bring it a steady income: Natural gas, which it has vast deposits of and which Turkey wants to import for its energy needs after Russia cut off its supply of gas to that large regional consumer.
In the meantime a bailout for the Kurdistan Region is necessary. It would be far too dangerous to risk an economic collapse in this region. Furthermore it must be recognized that the region is in the unenviable place it is now due to events out of its control. Also, since it would be paid back, a bailout would be a relatively small and worthwhile investment in the continued stability and security of an important region and a friendly power.
The United States and many European countries have a vested interest with the Kurdistan Region in seeing ISIS contained and the Kurdistan Region secured. Helping alleviate its economic woes by providing a bailout (which would also give Erbil greater freedom to enact the necessary reforms and broader diversification of the economy needed to weather this storm) would be a short-term solution to the plethora of aforementioned problems it is struggling to cope with.
Just look what Germany wants to do for Turkey: Provide it with a grant worth €3 billion to give Ankara an incentive to stem of refugees coming from its territory into Europe in the hundreds-of-thousands. While 2.2 million refugees is no small figure it’s certainly a less significant figure for a big country like Turkey to host than 1.8 million internally displaced persons is for Kurdistan to host. The Europeans and Turks should recognize this and accordingly seek to put together a bailout package for Kurdistan in recognition that it is in their self-interest to do so.
Similarly the United States could easily provide some of the funds needed for at least part of such a package. Something which would further bolster a stalwart ally in a time of need. All of these powers interests more or less coincide on this matter so they should, in recognition of that salient fact, work together to help Kurdistan weather this storm. It’s a comparable small price for them to pay now in order to secure the continued survival and longevity of an important regional ally and friend.
Paul Iddon is a Rudaw reporter based in Erbil, Kurdistan Region.
The views expressed in this article are those of the author and do not necessarily reflect the position of Rudaw.