Leaders of the semi-autonomous Kurdish region in northern Iraq have deployed soldiers known as peshmerga.
Leaders of the semi-autonomous Kurdish region in northern Iraq have deployed soldiers known as peshmerga.

Rifts in Kirkuk are as deep as its oil wells



KIRKUK // The heavy machine gun mounted on the back of a pickup points south from the Kurdish military outpost, across a field of young shoots of wheat and towards an Iraqi army base just four kilometres away.

"There were forces here before, but just a few with light weapons. Now, we have more weapons and a brigade stationed here," says Lieutenant Hamid Nowsher, a platoon commander with forces controlled by northern Iraq's semi-autonomous Kurdish government. An enormous Kurdish flag flutters behind him.

"And the Iraqi army used to have nine soldiers over there. Now they have 120 with Humvees, and long-distance weapons," he adds.

These two military forces were not always faced against each other. After the fall of Saddam Hussein, against whom Kurdish guerrillas fought a bitter resistance, the two armies joined together to fight growing terrorism.

But that alliance has frayed amid competing claims over the pockets of oil that lie beneath the flower-dotted hills. Long-standing grudges have flared anew, and US forces, who once helped mediate between various factions to minimise tensions, are no longer here.

Across rolling mountains dotted with wild flowers 20 kilometres south of the city of Kirkuk, thousands of extra soldiers have been deployed in recent months.

Leaders of the semi-autonomous Kurdish region in northern Iraq have deployed soldiers known as peshmerga, and Nouri Al Maliki, Iraq's prime minister, has moved a new force called the Tigris Operations Command into the area.

There have been occasional shoot-outs between the two sides in recent months, and many predict a descent into a long-feared war for control of the oil-rich and strategically important part of the country.

The city of Kirkuk, capital of Kirkuk province, is a rich ethnic mix, with its Arabic, Kurdish, Turkoman and other traditions evident in the mix of ancient architecture on the citadel, the languages shouted by market vendors in the bazaar and in the varied faces of the people.

The people of Kirkuk remember when the American soldiers, fighting alongside peshmerga, first arrived in the city ten years ago.

Kurds in particular saw this as a glorious moment, the end of decades of repression by Saddam Hussein, which included forced displacement and the use of chemical weapons in the village of Halabja in 1988.

But Kirkuk is still claimed by both Arabs and Kurds, and the past decade has seen endless, tense political arguments about how to resolve the dispute.

Sandwiched between the swelling Arab and Kurdish forces, the Kurdish governor Najmuddin Kareem, who heads the provincial council, said that he worries about security.

He was furious when an edict was issued in Baghdad in May last year forming the new military command structure and even more incensed when the orders were updated in June to place the city's police under the army's control.

"It all started when the prime minister created the Tigris Operations Command, which is tantamount to declaring martial law," he said.

Security in the province, he said, should fall under his control, and the status of the peshmerga, the Iraqi army and the city police had been agreed on for several years. But the new orders "put them all under military control".

The new military deployment came after several months of growing friction between the government in Baghdad and the Kurdish authorities, who have been increasingly assertive about controlling access to oil resources under their land, and even in areas whose governance is still in dispute.

In October 2011, the oil giant Exxon Mobil signed an exploration contract with the Kurdish government. This, say officials in Baghdad, contravened an agreement the company had with the central government to operate in the south of Iraq, and also included plans to explore areas that both the central and Kurdish authorities claim as their own.

"We consider all contracts signed in Iraq to be illegal unless they are signed with the Iraqi government and ministry of oil," said Ali Moussawi, an adviser to Mr Al Maliki. "If [Exxon Mobil] keep working in the north, we will kick them out of the south."

He said that despite the troop deployment, the government wished at all costs to avoid military confrontation. But he added: "The Iraqi fortune is very precious ... we will do anything to keep our fortune."

In Kirkuk, the governor acted quickly to maintain control at least of the police within the city, and set up checkpoints to prevent army units from coming inside the city limits.

"We ensured the police did not obey the order that everything would come under military control," Mr Kareem said. "[The Iraqi army] knew if they entered there would be a confrontation."

The commander of Iraqi national army forces did not respond to requests for an interview, but General Sherko Fateeh Shwani, who commands the Kurdish units around the Kirkuk, said that several Iraqi army divisions had been deployed to the area in addition to the longstanding 12th division, with whom he had co-operated and run joint checkpoints around the city.

"When they founded the Tigris Operations Command, they were saying, 'We will control the city by force'," he said. After it was formed, he said, Kurdish authorities increased their military presence in the area from about 3,000 troops to 23,000.

"If we are attacked, we will defend ourselves," he said.

In the meantime, he said, he has stopped co-ordinating and sharing intelligence with the Iraqi army, and he said that this was probably the reason for a recent spike in attacks by terror groups long active in the area. In Kirkuk, the police headquarters are charred up to the fourth floor after a car bomb and suicide attack earlier this month. In the town of Tuz Kharmatu, a little farther south, dozens of people have been killed in recent bombings.

"There is no trust between the sects, the different nationalities," said Ali Mehdi, a Turkoman provincial council member in Kirkuk.

"Each nationality has its own plan for Iraq, so patriotism became a secondary demand for national parties, for sects."

When the invasion began in 2003, he said he was optimistic, but now feels differently.

"Some days, when I see a Kurd, I think this is my enemy. Some days, when I see an Arab, I think this is my enemy. This is what the Americans did," he said.

In town, shopping in the markets, the people express a weary contempt for their politicians and for the long-unresolved conflict.

"Every ethnicity is looking for the oil," said Um Dunia, a teacher. "All the problems are with the oil. If we didn't have oil in this city, there would be no problems in Kirkuk.

"I hope that the oil dries up so that the problems also dry up."

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.”

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Director: Amith Krishnan

Rating: 3.5/5

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Director: Matty Brown

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Final: Iran beat Spain 6-3.

Play-off 3rd: UAE beat Russia 2-1 (in extra time).

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