An Oasis of Safety and Potential

The Kurds have proven themselves as a force to be reckoned with in times of peace and conflict. As the tides of war recede, Kurdistan once again aspires to greatness as a business hub for the region.

In a volatile time for the Middle East, the Kurdistan Region has established itself as an oasis of safety and stability. Established as an autonomous region in Iraq in March of 1970, its economy embarked on a rapid growth in 2007 with the arrival of petroleum multinationals.

By 2009, Kurdistan had the lowest poverty rate in Iraq and—building on its budding oil and natural gas sector—its economy flourished, diversifying into construction, tourism, and real estate.

As the civil war in neighboring, Syria took an even more sinister turn with the rise of the self-styled Islamic State, and violence spilled over into Iraq in 2014, the Kurdish economy ground to a halt in what some have called Kurdistan’s Great Recession. Indeed, its oil, construction and tourism sectors all depend on foreign investment, companies, and visitors, all of which have stayed away from the region due to security concerns.

However, whether in Syria or Iraq, Kurdish forces have proven to be among the most reliable allies against I.S. and, following the siege of Mount Sinjar, Kurdistan’s Peshmerga fighters have fiercely defended its territory in Iraq and successfully pushed the enemy out.

Even before Mosul, Islamic State’s last stronghold in Iraq, was retaken in July 2017, Kurdistan and its capital Erbil were a notorious safe haven in contrast to neighboring regions, welcoming upwards of 1.3 million refugees and internally displaced people.

As the conflict reaches its conclusion in Iraq and Syria, Kurdistan renews its focus on business and its plans for independence from Iraq, with a referendum scheduled for September 2017. Looking forward, perhaps Kurdistan will soon be able to grasp the bright future that seemed within reach before the war.

The Prospects of Independence

In the dying days of the Ottoman Empire, during World War I, France and the United Kingdom divided the region between themselves with the Sykes-Picot Agreement. Ratified in May 1916, just over a century ago, the agreement’s borders are now notorious for their disregard of local communities. Like many, the Kurdish people found themselves divided between Turkey, Syria, Iraq, and Iran.

Since obtaining autonomy as a region in 1970, Iraqi Kurdistan has been vying for independence from Iraq. The Kurdistan Regional Government (KRG) is led by a coalition of the region’s two main parties—the Kurdistan Democratic Party (KDP), whose historic stronghold is the capital, Erbil, and the Patriotic Union of Kurdistan (PUK), which controls the south of the region, including the second largest city, Slemani.

Hoping to capitalize on the end of the conflict in Iraq, the KRG has set a referendum on independence for the 25th September 2017. While all political parties support Kurdistan’s independence, the main opposition in parliament, the Movement for Change, or Gorran, does not support the referendum as it favors negotiations with Baghdad.

Nevertheless, the referendum is expected to garner between 65% and 95% of the votes for independence.

Leading up to 2014, Kurdistan was by far the most prosperous region in Iraq. However, despite the Peshmerga’s proven prowess in defending the region, the conflict has caused the economy to plummet. By 2016, the standard of living in Kurdistan was lower than in the rest of the country.

Kurdistan still has significant natural resources, though, which will help its recovery from the recession of the past couple of years.

An Oil and Gas Heavyweight

Estimated Oil Reserves
Daily Oil Production

Kurdistan’s oil industry started its rapid growth shortly after the fall of the Saddam Hussein regime, when international oil companies came into the country in 2007. With an estimated 45 million barrels of oil reserves, the region produces 600,000 barrels a day.

According to Bloomberg, were it to become an independent country, Kurdistan “would probably qualify for OPEC membership. It wouldn’t even be the smallest member.”

Its oil exports are currently overseen by an agreement reach with Baghdad in November 2014, whereby 250,000 barrels transit through the Iraqi oil company SOMO and another 300,000 barrels flow from the Kirkuk region through a pipeline running through Kurdistan.

However, the sharp rise in oil production and export has not been able to make up for the consistently low oil prices of the past few years. This, combined with the economic toll of the war has led to the sharp decrease in the Kurdish standard of living.

Did You Know?

  • Security issues in Iraq and Syria have affected Kurdistan’s reputation. However, Erbil and its surroundings’ safety track record is comparable to European standards.
  • Despite being part of Iraq, the Kurdistan Region has its own security forces, the Peshmerga.
  • The region has 5.3 million inhabitants with a growth rate of 3%.
  • Kurdistan welcomed 1.3 million refugees during the war in Syria and Iraq.
  • Though Sunni Islam is the main religion, Kurdistan has significant Shia, Sufi and Christian minorities.
  • The official language is Kurdish, and some Kurds don’t speak Arabic at all.

A Tourism Comeback

Kurdistan is a popular destination for Iranian and Iraqi tourists due to its stability and security standards. It is also well connected beyond the region, with flights to London, Amsterdam and several Scandinavian and German cities, as well as connections to the nearby international hubs of Dubai, Abu Dhabi, and Doha.

Passenger Arrivals at Erbil International Airport

While Erbil’s concentric circles and the wider Kurdish region have their appeal and show some potential for future development, Kurdistan’s landlocked geographic situation limits its prospect as a leisure tourism destination beyond its immediate neighbors.

This is why construction and real estate developments have been focusing on business tourism facilities such as office spaces for international companies and hotels for the visiting businessmen. The strategy has borne its fruits with a nearly tenfold increase in arrivals at Erbil International Airport from 2006 to 2014.

Our Team in Kurdistan

Maria Almodovar
Project Coordinator
Alejandro Jalon
Business Analyst
Stephanie Huertas
Manuel Sainz