Iraqi Kurdistan’s Careful Energy Diplomacy Informs its Stance on the Conflict in Ukraine

Iraq

Energy Policy

Commentary

Dr. Diana Galeeva

During his recent official visit to the UK, Kurdish Prime Minister Masrour Barzani met with his British counterpart Boris Johnson, and expressed the desire to export energy to Europe to reduce its reliance on Russian oil and gas. The Kurdistan Region of Iraq (KRI) produces and exports around half a million barrels of oil per day and almost 500 million cubic feet of gas per day, with potential to expand its capabilities in both areas.

Given the Kurdish government’s ambitions to transform the autonomous region into an energy hub within the Middle East, can energy diplomacy serve as an effective soft power tool with European states? It is possible, but using it will require careful consideration of Kurdistan’s energy policies, internal and regional tensions, and other Middle East players’ responses to the energy crisis in Europe caused by the war.

Energy Diplomacy in the Context of Soft Power

The ways in which national interests may be pursued in response to the war in Europe, as one may regard the Kurdistan initiatives, echo the well-recognized notion in political economy and international relations theory of ‘economic statecraft’, a concept introduced by David Baldwin. The notion of economic statecraft examines economic factors being used in pursuit of national objectives abroad as a part of foreign policy, and observes quantitative change (how intensively economic tools are applied), qualitative transformation (what means are employed), and any changes in objectives (what national goals these economic means aim to achieve). The Kurdistan region’s venture into the use of ‘energy diplomacy’ can be seen as a case study, which requires a broader understanding of the concepts of soft and hard power. The potential challenges and perspectives are in part generated by the current regional architecture, as will be discussed further after a detailed consideration of relations between soft power and hard power within the context of energy diplomacy.

There is no specific definition that captures “energy diplomacy,” but in general it relates to government-linked foreign activities that work to guarantee a country’s energy security while also stimulating business opportunities linked to the energy sector. According to Steven Griffiths, diplomacy is one of the most vital tools a state can use to protect its energy interests, and can be either bilateral or multilateral in scope. Normally, bilateral diplomacy, which includes direct diplomatic activities between two countries, is both flexible and efficient because coordination costs are lower and interests are easier to align when fewer parties are involved. Bilateral diplomacy can be especially effective when linked to common interests between countries, and is affected by commonalities and differences linked to each country’s politics, culture, and economy. Bilateral diplomatic relationships can be boosted when a state can draw on the influence it can project toward its counterparts, without this becoming a direct confrontation.

In this respect, ‘soft power’ is a vital concept, allowing one state to get another to do what it wants without coercion. This is the key distinction from ‘hard power,’ which relies on more heavy-handed methods. States with sufficient resources may succeed in an energy transition by implementing ‘hard power’ tactics of coercion or payment, but normally this approach fails to build trust and collaborative partnership. Soft power, on the other hand, can often succeed, finding more efficient solutions to countries’ disputes and leading to long-term partnerships.

A “Win-Win” Between Baghdad and Erbil?

Within these theoretical explanations, one can argue that the Kurdistan region could turn to energy diplomacy as a soft power tool in order to deliver the required oil and gas to Europe. However, there are political and economic challenges at the domestic level, particularly relations between Baghdad and Erbil. While Kurdistan remains a semi-autonomous region in Iraq, Baghdad-Erbil relationships are not linked by a constitutional legal framework, but rather by an uncodified and shifting balance of power. Kamaran Palani offers classifications of these different phases and forms, arguing that they resemble relations between a highly autonomous region and a weak central government (2003-2014), relations between two de facto countries (2014-2017), and relations between an autonomous region within a federal structure (late 2017 to the present).

This lack of political clarity also has economic implications, such as the game-changing decision of Iraq’s Federal Supreme Court in February to overturn the 2017 law governing Kurdish oil and natural gas exports—the court’s decision abruptly transferred oil marketing rights to Baghdad and required all production-sharing contracts to be subjected to federal oversight via the Ministry of Oil. This decision challenges Kurdistan’s ability to conduct energy policy independently from the rest of Iraq. However, the recent Kurdish leader’s proposition to build a confederation in Iraq could assist in overcoming the current ambiguity in Erbil’s relationship with Baghdad and accommodate the reality of Iraqi Kurdistan’s de facto existence as an ‘independent state.’ This is presented as a ‘win-win’ approach for both Baghdad and Erbil, since it will assist in finding common ground on energy diplomacy, create economic benefits for both sides, and assist both the federal and regional governments in conducting energy diplomacy as a soft power tool in their respective relations with international partners.

Diplomacy Versus Regional Tensions: Soft Power Against Hard Power

Such an arrangement faces many challenges. However, as Mr. Barzani observed, the Kurdistan Region has the capacity to replace at least some of the energy shortfall in Europe. The Kurdistan Region’s gas reserves are estimated to be about 3 trillion cubic meters, or roughly 2 percent of the world’s total reserves. Given Europe’s supply limitations, Kurdistan is considering the use of energy diplomacy as a soft power tool to achieve strategic objectives by leveraging bilateral relations with other states. An example of such an initiative can be found in its current arrangements with Iraq’s Gulf partners, such as the United Arab Emirates. Beginning in 2007, but advancing more significantly after 2019, Kurdistan’s main gas field has been developed by the worldwide consortium PEARL Petroleum, in which the major gas companies Crescent Petroleum and Dana Gas (both UAE-majority owned) hold a 35% stake each. The field’s production has been increased to more than 450 million standard cubic feet per day (MMSCUFPD) and is slated to reach more than 700 MMSCUFPD by 2023 and 900 by 2025.

The war in Ukraine opened another opportunity for such soft power collaborations with regional players. Reportedly, Kurdish, Turkish, and European officials have met to discuss a plan to pump Kurdish gas into Turkey and Europe, with the support and possible involvement of Israel. That said, the existing tensions in the region, and the tendency of regional players to use hard power tactics to ensure security, have already diminished the use of soft power approaches. This collaborative supply plan is reportedly part of what angered Iran into striking Erbil with ballistic missiles in March. This is a telling complication in Iraq’s foreign policy objectives, showing that regional competition and the use of hard power can disrupt soft power initiatives. The attack was linked with the ongoing Iran-Israel proxy conflict, along with Iran’s own energy policies agenda—specifically the expectation of a new nuclear deal being ratified. Under a nuclear agreement that removes sanctions on Iran’s energy sector, Tehran aims to emerge as another alternative to dependence on Russian energy supplies for Europe.

Energy Diplomacy as Soft Power

Finally, as Kurdistan has sought to promote its national interests, it must also manage the challenges created by its existing relations with external powers. While Kurdistan has officially remained neutral in the Russo-Ukrainian conflict, it has positioned itself as a competitor to Moscow by offering gas to Europe. Moscow and the Iraqi Kurds have deep long-standing relations, both in politics and in energy; Russo-Kurdish energy ties can be seen as an extension of political ones, and another instance of soft power via energy diplomacy. Russia showed its support for the Kurds by remaining neutral on the KRI independence referendum in September 2017, while virtually every other foreign actor, including the United States, condemned it. Furthermore, in February 2017, Russian energy giant Rosneft lent the KRI around $2.5 billion and invested in local Kurdish oil and gas export infrastructure. As Dr. Anna Borshchevskaya explains, “Moscow essentially saved the KRI at a crucial juncture and gave the Kurds more leverage over Baghdad (though Russia was careful not to endanger Gazprom’s substantial energy deals with the Iraqi federal government).”

Despite this, just as the Kremlin has pursued its careful approach to balancing relations with all sides in the region—dealing simultaneously with Baghdad and Erbil, for instance—the KRI has also developed its own links with all external players, explaining its neutral stance in the war in Europe. Given such attempts at neutrality and balance, energy diplomacy and its use as soft power are likely to remain vital into the future; and as circumstances shift both in the region and around the globe, new obstacles and challenges will need to be met.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.