Three recent developments across the Kurdish territories move the Kurds closer to political independence and economic autonomy. But despite these victories, the financial viability required by a Kurdish state or states is still in question.
In last month’s Turkish elections, the Kurdish party secured a potentially king-making bloc in parliament. In Syria, Kurdish forces, the YPG, made dramatic gains at the expense of ISIL, capturing a key border post and advancing towards the group’s capital of Raqqa. And the Kurdish region of Iraq appears to have abandoned its revenue-sharing deal with Baghdad and is again attempting to sell oil independently.
In Syria, the Kurdish cantons of Jazira and Kobani are now linked, and divided from a third region, Afrin, only by a stretch under the control of ISIL and some mixed opposition groups, from the west bank of the Euphrates to the outskirts of Aleppo. Beyond Aleppo, an uneasy anti-Assad alliance holds Idlib province and runs almost to the Mediterranean.
The Syrian Kurds are currently producing small amounts of oil for local use, from fields formerly operated by China’s Sinopec. The Sinopec fields yielded about 13,000 barrels per day in 2010, the last pre-war year, while the state Syrian Petroleum Company’s fields pumped about 200,000 bpd. But with the pipeline running through ISIL territory and on to the regime-held Homs, the Syrian Kurds cannot export their oil.
Meanwhile the Iraqi Kurds are tightening their grip on oil around Kirkuk. Their agreement to export “federal” Iraqi oil through their territory to Turkey, in return for a share of central government revenue, appears to have broken down, perhaps this time irretrievably.
The Kurds could export about 300,000 bpd from their own fields and another 300,000 bpd or more from the Kirkuk area claimed by Baghdad.
At current prices, this would generate some US$900 million per month, close to the $1 billion the Iraqi Kurdish region requires for its monthly budget.
But Baghdad is likely to resume legal opposition, making buyers wary, while the Turks will not give the Iraqi Kurds a blank cheque, particularly while the situation of the Turkish Kurds remains uncertain.
The YPG’s advances open the tantalising possibility of oil shipments from the Kurdish regions of Syria and Iraq to the Mediterranean.
But the main Syrian ports of Latakia, Baniyas and Tartus remain firmly in the Assad regime’s hands. Small quantities of Kurdish oil could be trucked to markets within Syria or smuggled through it to Turkey.
Such exports would be prone to robbery and ISIL “taxation”. Syrian Kurdish oil is heavy and poor quality, yielding little value unless processed in a sophisticated refinery.
Even if the Syrian Kurds and allied opposition secured contiguous territory to the Mediterranean, there is obviously no chance of building a pipeline under the current situation. Oil that does reach external markets would still be tainted by doubts over its legitimacy.
Turkey’s president, Recep Tayyip Erdogan, has even floated the idea of a military intervention in northern Syria, with the unstated aim of preventing a united Kurdish belt.
The Iraqi and Syrian Kurds are not united either, although they have each lent the other military support against ISIL. They face tribal and party divisions. The Iraqi Kurds have a good working relationship with Turkey’s government, while the Syrian Kurds’ PYD party is closely linked to the PKK, which Ankara considers a terrorist group. They are also allied with the PUK, rivals to the KDP that dominates the Iraqi Kurdish government.
So these territorial advances do not secure the reliable, legitimate, large-scale oil exports that the landlocked Kurdish regions require to backstop a push for independence. But they do win the Kurds powerful friends abroad, most notably in Washington. And they contribute to a growing sense of the inevitability of some kind of Kurdish independence.
Robin Mills is the head of consulting at Manaar Energy and the author of The Myth of the Oil Crisis.
Follow The National's Business section on Twitter
In numbers
- Number of children under five will fall from 681 million in 2017 to 401m in 2100
- Over-80s will rise from 141m in 2017 to 866m in 2100
- Nigeria will become the world’s second most populous country with 791m by 2100, behind India
- China will fall dramatically from a peak of 2.4 billion in 2024 to 732 million by 2100
- an average of 2.1 children per woman is required to sustain population growth
The Gentlemen
Director: Guy Ritchie
Stars: Colin Farrell, Hugh Grant
Three out of five stars
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
