Wednesday, September 13, 2006

Cede Kirkuk

In Iraq some government officials have finally openly floated the idea of breaking the country up. The country, approximately (but only approximately) divided into Kurdish, Shiite, and Sunni areas, is often said to have been artificially cobbled together by the British during the period in the early 20th century when the modern Middle East was created. (Baghdad has the misfortune at a time of increasing tribal hostility to have Sunnis and Shiites thrown together.) The Kurds in the northern part of the country do not fly the Iraqi flag on most of their buildings and apparently see independence – which would yield the first Kurdish state in the modern era – as a foregone conclusion. One of the things presumably holding their move toward independence up is the nettlesome problem of what to do with cities that are part Kurd and part Arab. Among the most problematic of these cities is Kirkuk, whose Kurdish population was heavily diluted during the Saddam Hussein era by Arab immigration. So any Kurdish independence drive would have to resolve the question of whether Kirkuk stays in Iraq or becomes part of Kurdistan.

A quick glance at the map reveals why it is such a critical question.

Kirkuk sits astride one of Iraq’s biggest oilfields. And oilfields, contrary to conventional wisdom, are a curse more than a blessing. Think about a world in which there are two kinds of resources – human capital (skills) and natural capital (stuff under the ground). It is difficult to excessively tax human capital in a world in which people are mobile. Canadian doctors who find their reimbursement rates lowered by Canada’s state health-care system are free to migrate south, limiting the bargaining power of the Canadian government. Philippine or African nurses who are underpaid or overburdened by the daily corruption of their countries can move to rich societies that can make them a better offer. Ambitious French entrepreneurs who are excessively taxed by the French government can simply take the Channel train to England and set up shop there.

Natural capital, in contrast, is easy to gain taxation authority over simply by controlling the ground under which it sits. Thus the incentive to fight over such territory is vast. (Think of the diamond wars in West Africa, and the broader resources wars that have consumed the Democratic Republic of Congo.) So too is the incentive to gain a share of the oil income via bribery of officials who (if the government meaningfully controls the country) control that income. Thus it is unsurprising that countries that depend more on fuel exports (and exports of minerals and fuels more generally) are more unstable and corrupt. Oil exporting is mainly a poor country's game; only Britain and Norway (and perhaps Malaysia) have been able to combine substantial oil exports with peace and clean governance, and all of that was built in the first two cases before the discovery of oil.

The Kurdish territories have built a vibrant economy without much oil in the heart of their territories, as the map shows. Most of the oilfields are in the border region, but few are in the heart of Kurdish territory. Despite (or more likely because) of this, the Kurds have managed to build a vibrant economy without the violence that plagues the rest of Iraq. A report in Reason magazine, an unlikely source given its libertarian, anti-interventionist tendencies, describes how the Kurdish economy is flourishing, in stark contrast to the chaos to the south. But Kirkuk and Mosul are much more violent places, and I think the Kurds would be wise to give these places up, and indeed not drive too hard a bargain on all the border or fields as they negotiate their departure from Iraq. The Kurds who live there, who became a diminished majority and perhaps even a minority during the Saddam Hussein era, presumably have a huge emotional attachment to them. This will be a thorny problem to overcome, but it is probably an easier one to deal with than the violent alternative that awaits them if the Kurds and the Arabs end up fighting over these cities (or, rather, the oilfields under them).


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