Erbil’s party comes to an end as ISIL comes knocking at the door

Business at the Iraqi Kurd capital of Erbil is on the decline ever since the ISIL took over.

People walk through the Qaysari market in Erbil, Iraq. Establishments are now mostly empty as the Islamic State advance scared off customers. Dan Kitwood / Getty Images

It is Karaoke night at DC Steakhouse in the Iraqi Kurd capital of Erbil and diners are singing along to love songs as the imported drinks flow in a haze of shisha and cigarette smoke.

Rebaz Serbaz and Aram Siddiq, both in the security business, take turns at renditions of a Kurdish song.

“We want to set an example, to tell the people, ‘go out, relax, don’t be afraid,’” says Mr Serbaz, 29. “If you’re going to die, don’t kneel to anyone,” he says.

Almost three months after the streets of Erbil emptied as Islamic State extremists advanced, the subdued city is counting the cost to a once thriving economy. At the same time, it is trying to show it can remain an oasis of security, prosperity in an Iraq ripped apart by violence.

While the momentum behind the city’s transformation since the US-led invasion has stuttered, the music at least is still playing.

“It was a party scene. All bars were packed,” says Gunter Voelker, 50, proprietor of the Deutscher Hof Erbil bar. “Everything may decline, but never ever Erbil because this would be the end of the Kurdish idea.”

At DC Steakhouse the clientele has dropped off. At least 150 diners would cram there last year, the owner Allam Karkafi says. On the latest Karaoke night last Sunday evening, there were barely 30.

Many expatriate workers, including those in the oil industry, remain away and western countries maintain their advice against travel to Iraq. The violence to the west and south of Erbil deterred visitors from across the region in the year when the city was named Arab Tourism Capital.

Hundreds of thousands of Kurds meanwhile have not been paid a salary since the end of July because of a spat with the central government in Iraq, limiting their ability to spend.

“The original thinking was to transform Erbil into some form of high-end tourist destination for rich Middle Easterners,” says Liam Anderson, a professor of politics at Wright State University in Ohio. “At the time, the money was flowing in and it seemed like the good times would never end.”

At the Ottoman-era Qaysari Bazaar, men eat slices of beets simmered in tamarind juice, have their hair cut at Classic for Man Beauty and buy slabs of meat at a butcher’s squeezed between two women’s clothing stores.

Higher-end stores selling jewellery and carpets are mostly empty. Shoppers stopped at Soz Goldsmith to admire necklaces, engraved bracelets and glittering rings in the window.

“But hardly anyone is buying,” says the owner Rizkar Abdul-Qader. More people are selling gold to pay school fees and rent than making purchases, he says.

Men who typically bought 300 grams of gold worth about US$12,000 as a wedding gift for their bride, now buy 100 grams or less, he says.

“This is the worst period I’ve been through,” says Mr Abdul-Qader. He opened his shop in 2003.

As he speaks, a couple with a baby daughter walk in, causing his eyes to light up. The wife chooses a flower-shaped gold pair of earrings for her daughter but later leaves without buying it as she deems it too expensive at $110.

“When salaries are paid regularly again, people will buy,” Mr Abdul-Qader says.

Oil from the Kurdish region and budget transfers from Baghdad snowballed the local economy to $20 billion from mere millions before the ousting of the Iraqi leader Saddam Hussein following the US-led invasion.

Economic growth in Iraqi Kurdistan could take a hit of about 5 per cent this year, the Erbil-based Rudaw News Agency says, citing Sibel Kulaksiz, a senior economist at the World Bank who recently led a mission to the region.

Other hostelries reported a similar drop in business since violence swept through large swathes of Iraqi territory in June and attempted to advance toward Erbil in August. The arrival of the extremists on Erbil’s doorstep was completely unexpected, says Dlawer Ala’Aldeen, the president of the Middle East Research Institute in the city.

“August 2014 brought all that memory back,” he says. “A lot of people were seen on the streets here, fully packed up and heading, facing the mountains, studying the routes of escape.”

At Deutscher Hof Erbil, Mr Voelker says August 6 “was a very confusing night”.

He told about 25 diners lounging on red-topped benches in his establishment that something was going on and organised cabs to take them home. Things have not been the same since, he says.

The violence coincided with the Kurdish government’s inability to pay salaries for the past three months. The Kurdish Regional Government struck deals with oil companies and collected the revenue. The Iraqi government says it should control the oil deals and has withheld the budget for the region since the beginning of the year.

That has affected 1.4 million government employees and retirees who cannot afford previous luxuries. In the region, per capita gross national income adjusted for the cost of living is about 29 per cent higher than Iraq as a whole, based on 2011 data from the Kurdistan Regional Government and World Bank.

About a fifth of the Kurdish regional economy is public administration, the government says.

“We now find ourselves with so much potential, with so much capacity, capability, the only thing stopping us is politics and war,” says Mr Ala’Aldeen.

* Bloomberg News

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