With Iraq and Iran sharing a 900-mile border and deep commercial ties, the renewal of U.S. sanctions against Tehran without doubt would be felt in Baghdad. To what degree the Iraqi economy could end up collateral damage of the sanctions, however, requires detailed analysis.
The mounting debt crisis of Iraq’s Kurdistan Regional Government poses a long-term threat to the country’s economy and ultimately, perhaps, its stability. For now, Iraqi political leaders are consumed with negotiating a new, post-election government, but a solution to the KRG’s insolvency cannot wait too long. It will require the next government to quickly put aside parochial politics and help the KRG find creative ways to restructure its debts.
As Iraq’s parliamentary elections approach this weekend, destabilizing disputes with the Kurdistan Region remain unresolved. Perhaps the most intractable, and least discussed, is how to address the insolvency of the semi-autonomous Kurdistan Regional Government (KRG). It’s a simmering crisis that threatens Iraq’s economic future and political unity, and one that the central government needs to step up and help defuse.
The economy of Iraq’s semi-autonomous Kurdistan Region is on the brink of collapse; only the central government in Baghdad can stop an economic free fall that’s already damaging the broader Iraqi economy. While a rapid, negotiated solution to this crisis is essential to stabilize and unify Iraq—and reassure investors needed for post-ISIS reconstruction—a host of complex issues over oil and the national budget stand in the way.
The impasse between Iraq’s central government and its Kurdistan Region is building into an economic problem, and both sides need to quickly find a way to negotiate a solution. While political conflict between the authorities in Baghdad and the regional capital of Erbil has been quieter since Iraqi troops ousted Kurdish forces from disputed territories in October, the Kurdish region’s economy is unraveling, with risks for both sides.