Iraqi Kurdistan is hoping to gain greater financial autonomy by selling government bonds to foreign investors. Although the Kurdish bonds are not yet for sale, the Kurdistan Regional Government (KRG) has recruited two international banks — Goldman Sachs and Deutsche Bank — to help arrange the bond sale. The borrowed money would be spent exclusively on Kurdish infrastructure projects — not for military or humanitarian ends.
Increasing Autonomy in Iraqi Kurdistan
The Kurdish Autonomous Region, also known as Iraqi Kurdistan, has been pushing for increased amounts of autonomy since its de facto independence after the Gulf War in 1991. When the United States toppled Saddam Hussein in 2005, the KRG solidified its hold on Northern Iraq, including profitable oil fields.
The KRG believes that these oil fields are the key to their financial independence. Without the ability to sell its own oil, the KRG has been dependent on the Iraqi Government to sell Kurdish oil, and in return, get a portion of the Iraqi budget. Recently, the relationship between the KRG and the Iraqi Government has turned sour, and the KRG claims that they haven’t been paid by the Iraqis.
Rising Costs Due to ISIS
The rising cost of the fight against the self-declared Islamic State is complicating the issue of KRG-Iraqi relations. The Kurdistan Regional Government’s Peshmerga forces have been defending the Kurdish region, with minimal to no financial support from the Iraqi government or the international community.
The KRG has also experienced an influx of several million refugees who have descended upon Iraqi Kurdistan, seeking refuge from the brutality of ISIS. The cost of harboring these refugees in on the rise.
Kurdish Bond Sales & Investment
In response to these rising costs, the KRG is working to sell government bonds to foreign investors. Some opponents to the bond sales say that they would leave the region paying an exorbitantly high borrowing rate — nearly 12 percent per year for five years. Other critics say that Kurdistan doesn’t have the right to issue debt.
Kurdish officials say that they would be able to repay the debt by selling oil independent of the Iraqi national oil and gas infrastructure. It remains to be seen whether or not this would be possible.[Read more at the Financial Times]