Although the news is of the Kurdish Peshmerga valiantly fighting against the Islamic State and trying to stem the tide of Islamist rebels in the region, behind the headlines is a story which offers long-term hope.
Erbil, the capital of Kurdistan, has slowly been regenerating and repositioning itself as a viable regional commercial hub. Relatively free from the instability of the region, Kurdistan has been quietly attracting foreign direct investment, primarily in the oil industry.
While the focus is on crude, the hundreds of millions of dollars worth of exports are creating multiplier effects, helping day by day to bring economic stability to a small, unique sliver of the Middle East.
Small indicators suggest that, in and among all the bloodshed and tears that plague the region, a future exists. Kurdish oil has, historically, been the result of product- and profit-sharing agreements between the Kurdish Regional Government and Baghdad.
Since around 2007, foreign investors have been teaming up with local Kurdish oil producers, exploiting Baghdad’s instability and circumventing any profit-sharing, finding grey market customers and flooding Erbil with new money, much to the ire of the Iraqi government.
As a result, most Western oil players won’t touch Kurdish oil – yet. With the instability spreading across Iraq and the Kurds fighting the Islamic State, Kurdistan is metres away from some significant form of independence, and with that, an economic bonanza awaits. Already, the structure is in place.
JP Morgan have gone into local partnerships, and the Erbil Stock Exchange is due to open in the near future. International brands such as Carrefour and Sheraton have either opened or have stated their intention to open up shop, and since 2003, 78 housing projects totalling over $5.8 billion have been undertaken, slowly and carefully altering the residential landscape of Kurdistan.
According to the Kurdish Board of Investment, almost $400 million was recently spent on upgrading Erbil International Airport, capable of carrying thousands of passengers and facilitating global transport and tourism, with the likes of Lufthansa and Emirates already regular carriers.
Most importantly, and surprisingly, as recently reported by the Wall Street Journal and Forbes, in deals neither confirmed nor denied by either party, the first barrels of Kurdish crude oil landed in Israel, signifying a break not only from Iraq politically and economically, but from the entire region.
According to Nat Abramov, an analyst at Mayfair-based based Business Intelligence firm Alaco, ‘The demographic investment in Iraqi Kurdistan is beginning to resemble the penthouse floor of a portered Mayfair block. Wealthy Arabs, Turks, Jews and even a famous former US Presidential candidate count themselves among Kurdistan’s new equity holders.’
The key investors and trading partners are naturally the Turkish government, who recently made peace with the Kurds and help pump Kurdish oil around the region, and Iran, given its geographical closeness. From 2006-12, according to the Kurdistan Board of Investment , $22 billion was invested in Iraqi Kurdistan alone.
With so much instability in the region, a surprising economic success story is emerging from the rubble, and with it, plenty of opportunity in Kurdistan.