The heightened interest in cryptocurrencies across the Gulf is taking place alongside global efforts to both regulate digital assets and attract cryptocurrency firms.
Iraq is a key battleground for Iran and Saudi Arabia as they compete for dominance in the Gulf region. Iran has emerged from the past decade with an apparent upper hand in many areas, such as in the self-governed Kurdistan Regional Government territory of northern Iraq. It is said that “The Kurds have no friends but the mountains.” Yet Saudi Arabia would be the Kurds’ new friend, seeing real value in engaging with the KRG in order to curb Iranian influence in Iraq, and weaken the Shia power structure in Baghdad by empowering Erbil, the capital of the Kurdistan region. And with Iraqi Kurds continuing to move slowly but surely in the direction of more formalized and thoroughgoing independence, Riyadh could find a nonviolent opportunity to bedevil Iran in an unexpected and strategically crucial area. Much depends on the skill with which Saudi Arabia tries to take advantage of a sudden opening that, if managed properly, could prove a major strategic windfall, but, if mishandled, might backfire.
Iran’s Existing Ties to the KRG
Iraqi Kurds have strong cultural and linguistic links to Iran, and for over a quarter of a century Tehran has cultivated a relationship with Iraqi Kurds by playing political parties off one another. Iran has strong influence with the Patriotic Union of Kurdistan, the Iraqi Kurdish political party that has its stronghold in Sulaymaniyah near the Iranian border. However, Iran has also bolstered its significant security and trade ties with the KRG by cultivating the Kurdistan Democratic Party based in Erbil. The KDP is the PUK’s main rival, and is led by KRG President Masoud Barzani. Iranian Foreign Minister Mohammad Javad Zarif highlighted these security ties in an interview with NPR in 2014, saying “When the Iraqi Kurdistan came under the threat of ISIL, Iran was the first to send advisers and equipment. Everybody else came long, long after.” Zarif also claimed, “We were the first [outsiders to provide such support] as Barzani said in his joint press conference with me.” The initial advances of the Islamic State in Iraq and the Levant actually strengthened Iran’s hand with Iraqi Kurds at the expense of other traditional players, namely Turkey; Fuad Hussein, chief of staff to the KRG presidency, said, “Turkey consistently reiterated that if the security of the Kurdistan Region is threatened they would intervene. Well, our security was under threat, but still we did not receive any support from Turkey.”
Iran’s relationship with the KRG has strong public backing. A 2016 public opinion survey found that nine out of 10 Iranians strongly support Iran helping Iraqi Kurdish groups to fight ISIL. Iran and the KRG also seem likely to sign an agreement after the month of Ramadan to build a pipeline that could carry 250,000 barrels of Kurdish oil per day through Iran to the waters of the Gulf. At present, the KRG exports oil to the world market through its sole pipeline that ends in the Turkish port of Ceyhan. This new partnership would allow the KRG to wean itself off of its exclusive dependence on the Ceyhan pipeline and could have huge political as well as economic implications by bringing Iran and the KRG closer together.
Ratcheting Up Saudi Support
What, then, can the Saudis bring to the table to advance their agenda and that of Barzani and the KRG? Fortunately for the Saudis, the KRG is badly in need of capital. Iraqi Kurdistan faces its worst economic and political crisis since the inception of its autonomous status with the creation of the “no-fly zone” in Iraq in 1992. Nearly 250,000 Syrians have sought refuge in Iraqi Kurdistan, and, in early June, the United Nations issued a statement on displaced Iraqis inside the region noting that, “Today, the [KRG] hosts over 1 million displaced [Iraqis], putting pressure on the region’s limited resources, particularly with respect to the provision of public services, at a time when the regional government is facing severe economic challenges.” Over a million more Iraqis are expected to flee to the Kurdish region in anticipation of the coming battle to liberate Mosul from ISIL.
After the fall of Saddam Hussein in 2003, Iraqi Kurdistan began inching along the road to independence, if only de facto. Riyadh feared Iraq’s new Shia-dominated government under then Prime Minister Nuri al-Maliki would become a gateway for Iranian influence in the Arab world. They hoped that a strong KRG could serve as a partner to keep Iran from completely dominating Iraq. But the Syrian conflict led to the emergence of ISIL and a resurgence of the Kurdistan Workers’ Party (PKK). These developments placed immense stress on the KRG’s security arrangements, especially at its borders, and destabilized its diplomatic agenda, political ties, and economic partnership with Turkey. Given low international oil prices and the lack of payments coming from the Iraqi central government in Baghdad, the KRG is now keen on doing business with almost anyone, including the Saudis, as long as they provide access to investments and front-loaded payments. Although Turkey and Iran will probably remain the dominant outside forces with the KRG, the Saudis could use their financial clout to carve out more influence within the region. Roughly one in six Iraqi Kurds are formally classified as employees of the KRG, so the Saudis can take advantage of the KRG’s budget crisis and use their economic leverage to aid the KRG, supporting its society and economy with aid and investments.
The Saudis have enhanced their bilateral relations with the Kurdish government by enhancing diplomatic ties. Barzani regularly visits the kingdom, and King Salman bin Abdulaziz personally received him when he visited Riyadh in December 2015, an act normally reserved for heads of state. Moreover, high-ranking members of the Saudi royal family, including the crown prince and deputy crown prince, attended a reception for Barzani. This reception may have been a theatrical display of Riyadh’s growing ties with the KRG, but it certainly demonstrated the Saudis’ commitment. In February, Saudi Arabia became the latest country to open a consulate in Erbil. The new Saudi consul, Abdul Moneim Abdul Rahman Saleh, stressed that the “Kingdom would not give up the Kurdistan region in any way” and saw opening the consulate as a major step in strengthening trade ties. Frzand Sherko argued that through supporting Barzani, “Saudi Arabia has shown both a willingness to create another oligarchic familial power system in the region and a gap in Iraq to isolate Iran…”
The KRG’s Independence Referendum
Members of Barzani’s KDP see opportunities in building deeper ties with Saudi Arabia. “Kurdistan should warm up to those who accept Kurdistan’s future and its efforts for statehood,” said Khasro Goran, a parliamentarian from the KDP. Prominent Saudis see a chance to blow smoke in the eyes of their enemies. Retired Major General Anwar Eshki, who heads the Middle East Center for Strategic and Legal Studies in Jeddah, stressed the importance of supporting the KRG to “dilute Iranian, Turkish, and Iraqi ambitions.” However, some Iraqi Kurds are wary of Saudi attempts to pull them closer into the orbit of Sunni Arab powers. Regarding the Saudi-Iranian rivalry, Farid Assasard, a member of the KDP’s rival party, the PUK, told Al Jazeera, “Kurdistan must not join one side of this conflict against another side…If we take sides Kurdistan will turn into another arena of the conflict in the region and we will have to lose from that.” The Saudis can use the twin pillars of capital and influence to spread their influence with various parties in an internally fragmented Iraqi Kurdistan.
It remains to be seen just how far the Saudis are willing to go in this effort. The ultimate test would be whether Riyadh would support the KRG’s pathway toward formal independence from Iraq. In February, Barzani called for a referendum on an independent Iraqi Kurdistan to drum up local support. In subsequent statements, he said the KRG “should hold a referendum before the US presidential election” in November. Iraq is experiencing profound instability and areas such as southern Iraq might be permanently cut off to the Saudis. Although the Saudis are unlikely to support a full-blown independent Kurdistan in the KRG’s territory, a potential tacit backing of the referendum could reap dual benefits. First, it would strengthen Erbil vis-à-vis Iranian-backed Baghdad by weakening the central government’s control over the country and undermining Iran’s ambition of dominating a unified Iraq. Second, Saudi Arabia would win more popularity among the Iraqi Kurdish population and pull the KRG further into its orbit. Riyadh would then be better placed to pursue more ambitious goals, such as the KRG supporting an autonomous Sunni region in Iraq or convincing the peshmerga (Kurdish paramilitary forces) to stand up more forcefully to Iraqi Shia militias.
Tehran would find that its hands – which until now have been successfully playing Kurdish parties off against one another, and Baghdad off against the KRG – have suddenly become tied. It would have to choose how to best react to the KRG’s march toward independence. The choice is complicated. Supporting the Kurdish moves could potentially alienate Iran from Baghdad and stoke national aspirations within its own Kurdish population. Or, if Tehran vocally opposes the KRG’s efforts to hold such a referendum, it could lay the groundwork for Riyadh to strengthen its economic and political clout in Iraqi Kurdistan. Either way, Riyadh ought to be able to use Tehran’s reaction to start fires in Iran’s backyard.
The regulations introduced to travel and civil status laws will limit the state’s ability to intervene in the private sphere.
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