THE KURDISTAN REGION OF IRAQ: THE ISSUES, THE

S E C R E T SECTION 01 OF 02 BAGHDAD 004768 SIPDIS SIPDIS E.O. 12958: DECL: 12/29/2016 TAGS: PGOV PREL PTER PINS ECON EAID PHUM KDEM IZ SUBJECT: THE KURDISTAN REGION OF IRAQ: THE ISSUES, THE LEADERS, POSSIBLE STEPS AHEAD Classified By: Classified by Robert Gilchrist, Political Counselor, for reasons 1.4 (b) and (d). -------------- SUMMARY -------------- ¶1. (C) Summary: The Kurdistan Region of Iraq is flourishing compared to the rest of Iraq, and is actively recruiting foreign investment and even international tourism. The Kurdish region is generally much more secure than the rest of the country, although illicit trafficking in arms, fighters and drugs occurs across the Iranian border, and the presence of the PKK is a constant source of tension with Turkey. The U.S. could encourage the KRG to take credible steps against corruption and greater government transparency. We could step up efforts to assist the KRG and GOI in controlling the border to bring down illegal trafficking. This is one of a series of analyses by Provincial and Regional Reconstruction Teams analyzing the governates of Iraq. End summary. -------------- POLITICAL ISSUES -------------- ¶2. (C) The Kurdistan Region of Iraq is dominated by the two main parties, the Patriotic Union of Kurdistan (PUK) and the Kurdistan Democratic Party (KDP),which, as of January 2006, merged their two governments into the Kurdistan Regional Government (KRG). This merger is experiencing some growing pains and is by no means complete. Each party still retains separate Ministries of Interior, Peshmerga, Finance, and Justice. Despite the loss of the &reformists8 in the recent PUK elections this movement highlights an element of dissatisfaction with Kurdish leadership. Adherence to democratic principles and individual rights such as freedom of the press is not up to western standards. -------------- Economic Issues -------------- ¶3. (C) The Kurdish region is flourishing compared to the rest of Iraq, and is actively recruiting foreign investment and even international tourism. However, the region,s economic system is burdened by a legacy of centralization and is dominated by the same people who dominate the political system. Despite possessing significant resource wealth, the Kurdish region is experiencing a painful fuel shortage and unemployment problem. Multiple demonstrations have occurred in Sulaymaniyah province within the last few months over the lack of essential services, university housing, and stipends ) largely driven by youth, women, educators and civic organizations. -------------- SECURITY -------------- ¶4. (C) The Kurdish region is generally much more secure than the rest of the country; the Kurdish security forces, the peshmerga, and Kurdish intelligence ensure order. People are able to leave their houses and go to markets without fear. Still, illicit trafficking in arms, fighters and drugs occurs across the Iranian border, and the presence of the PKK is a constant source of tension with Turkey. The possibility of armed conflict with Turkey exists, particularly in light of multiple reports that Turkey wants immediate action on this issue and is threatening to move into the Kurdish region to attack the PKK. Longer term, the current peaceful relations between the KDP and PUK could revert to the armed conflict that marked their relations in the past. -------------- KEY POLITICAL PLAYERS -------------- ¶5. (C) Jalal Talabani, President of Iraq and Chairman of the PUK, based in Sulaymaniyah; and Masoud Barzani, President of the Kurdistan Region and Chairman of the KDP, headquartered in Erbil. Everyone else is essentially subordinate in some way to these men. The region is administered by the Kurdistan Regional Government (KRG) under the authority of President Barzani and Prime Minister Nechirvan Barzani (PUK), his son-in-law. Provincial Councils were set up in 2005 in response to U.S. pressure, but have little authority and are BAGHDAD 00004768 002 OF 002 filled with party appointees. ¶6. (C) Masoud Barzani is thought to have more central control of his party (with less room for discussion and dissention in the ranks) than Talabani with the PUK. In fact, the PUK recently endured a vicious election that threatened Talabani,s leadership and eventually led to the resignation of the #2 PUK leader, Nawshirwan Mustafa. ¶7. (C) Other key players include: Kurdistan Region Vice-President Kosrat Rasoul (PUK); Head of Parastin (KDP Security Service) and son of Masoud Barzani and potential successor Masrur Barzani, Deputy KRG Prime Minister Omer Fattah Hussein (PUK); Speaker of the Kurdistan Region parliament Adnan Mufti (PUK); KRG Minister of State for the Interior Karim Sinjari (KDP); -------------- COMMENT: POSSIBLE STEPS FORWARD -------------- ¶8. (C) The U.S. could encourage the KRG to do the following, keeping in mind that the KDP and PUK will resist reforms reducing their economic and political dominance: prosecute corrupt officials and adopt a constitution guaranteeing individual rights and an independent judiciary; allow effective political opposition to the KDP and PUK, guarantee freedom of the press, give provincial governments the authority to raise revenues and expend funds, and permit NGOs and civil society organizations to operate without interference from the KRG, KDP, and PUK; and resolve the issue of the status of Kirkuk and other disputed areas in accordance with constitutional Article 140 and in a transparent and peaceful manner that considers the rights of all sects and ethnicities represented. ¶9. (C) We can encourage the KRG to develop a legal and regulatory framework promoting private investment and an efficient banking and finance sector, enact an internationally compatible hydrocarbon law in harmony with the national law, end KDP and PUK dominance of contracting and other economic matters; phase out subsidies for water, sewage, electricity and petrol, and increase investment in these facilities; and adopt a legal and regulatory framework fostering regional development while strengthening the unity of Iraq. ¶10. (C) To deal with the illicit traffic, we could continue the building of border forts and support the national border police and national customs service. To reduce the probability of armed conflict with Turkey, we should continue to encourage the KRG to be open to Turkish investment and to deal with the PKK in a way that meets legitimate Turkish concerns. Reducing the risk of fighting between the KDP and PUK will ultimately depend on their willingness to subordinate partisan to broader interests and to accept a democratic system. Over the near term, we should help build incentives for cooperation such as withholding assistance to the two ministries of interior if they do not merge as planned. SCOBEY