The Kurds' New Cause

Rivals are uniting behind economic growth in the northern Iraqi region

The plane wasn't much to look at -- an aging, leaky Boeing 727 in the livery of the West African airline, UTA. But it drew an enthusiastic crowd when it touched down recently on a primitive runway outside the northern Iraqi city of Arbil. On board were entrepreneurs and development experts eager to check out the Kurdish region, an area roughly the size of Jordan in northern Iraq. "This was the first time our people have seen a commercial flight flying over our city," declared Nechirvan Barzani, Prime Minister of the Kurdish regional government based in Arbil.

A tall, lean 37-year-old, Barzani is emerging as a key figure in the effort to forge a new Iraq. He hails from a renowned clan that has struggled for Kurdish independence from Iraq for decades. His grandfather, Mullah Mustafa Barzani, fought for the cause until he died in exile in Washington, D.C., in 1979. His uncle, Massoud Barzani, championed the resistance against Saddam Hussein's regime, which was responsible for tens of thousands of Kurdish deaths.

Now, in the wake of Saddam's defeat, the young Barzani would like nothing more than to bring independence and economic prosperity to Iraq's Kurdish enclave -- a stretch of green plains and looming mountains dubbed Kurdistan. Barham Salih, head of a rival regional government based in the Kurdish city of Sulaymaniyah, two hours' drive to Arbil's south, also wants to seize the moment. But both leaders realize that seeking full independence for the enclave, which has enjoyed substantial autonomy since it was carved out under U.S. military protection after the 1991 gulf war, isn't practical right now. Such a move could stir hostility in neighboring Turkey and Iran -- and is opposed by Washington.

The Kurds, who form 15% to 20% of the Iraqi population, differ from Iraq's Arab majority in language and traditions. But instead of spurning their old enemies, they are participating in Baghdad politics while trying to get their own house in order. The rival governments, each of which has controlled about half the region since fighting split the enclave in the mid-1990s, are now largely cooperating. The Kurds want, as it were, to beat their Kalashnikovs into laptops and focus on development. "Politics are beginning to change," says Salih. "Business investment and free trade are things people are more and more concerned about."

How the Kurds play their cards could be crucial to Iraq's future. The Kurds want to maintain, and perhaps even strengthen, their current degree of autonomy, which allows them to control their own economy, armed forces, schools, and judiciary. "Without a solution to the Kurdish question, it will be impossible for stability to return to Iraq," Barzani warns. But if the Kurds push too hard, they could make the daunting task of reconstructing Iraq even more difficult. Friction could develop with Baghdad over Kurdish-inhabited areas, such as oil-rich Kirkuk, outside the enclave. The Kurds would like to incorporate Kirkuk but realize such a step might be too divisive.

A SAFER BEACHHEAD. While the politicians in Baghdad hammer out a political formula, the Kurds are forging ahead with plans to capitalize on their region's relative stability. To attract capital, they have enacted investment laws and formed a company called Kurdistan Development Corp. The pitch to potential investors: Establish a beachhead in northern Iraq where it is safer and the people are pro-Western, then expand south when the smoke clears. "The northern region as a whole can be a gateway to Iran and Turkey and may act as a distribution and logistics center," says Iraqi Trade Minister Ali Allawi.

Northern Iraq may again become a tourist center, too. In calmer days, Iraqis used to flock to its hills and lakes to escape the hellish 120-degree summer days in Baghdad. The area also boasts some of Iraq's best agricultural land, and Kurdish officials say substantial oil deposits lie below. While Arbil is a muddy town in need of a facelift, Sulaymaniyah is a gem with a vast covered souk and modern buildings.

Both Sulaymaniyah and Arbil are much less menacing than Baghdad. True, a suicide bomber killed five people in Arbil in late December. But the bursts of gunfire that often break out in Baghdad are not to be heard in either Kurdish city. Only local Kurdish troops, known as peshmergas, carry weapons. No American armored vehicles patrol the streets. Just 200 American military personnel are stationed in Kurdish-controlled areas, and the U.S. hasn't lost a single soldier.

Given these relatively positive conditions, deals are getting under way, if slowly. Kurdistan Development Corp., with Kuwaiti partner K-International Aircraft Leasing, is working on providing regular commercial flights into Arbil. A functioning airport could be a huge asset since Baghdad International Airport is hampered by fear of missile attacks on aircraft. "We are looking at two flights a week starting on Jan. 4," says Ramsay Shaban, a former Iraqi Airways executive helping to organize the service.

MIXED FOREIGN INTEREST. Saddam's downfall has given Kurds the confidence to step up their own investments. Faruk Mustafa Rasool, who runs a Sulaymaniyah telecom and construction empire, says his revenues have jumped tenfold, to an annualized $100 million, since Saddam's fall. His Asia-Cell Company for Telecommunications recently won the mobile license for northern Iraq along with a Kuwaiti partner. He also has a license to set up a private bank. With no real banking system, businesses deal in stacks of dollars and local dinars.

If all goes well, Salih foresees a healthy local economy based on light industry such as pharmaceuticals and agribusiness and lucrative trade with Turkey and Iran. Meanwhile, he and Barzani are vying to slash taxes and spur building -- the key local industry. Despite their rivalry, the two sides are negotiating to reunify the region. The scuttlebutt is that Barzani would head the enclave, while Salih could be Iraq's future U.N. representative.

Of course, much more needs to be done to make the region attractive for investors. Foreign executives have mixed reactions to the Kurds. John Pitts, managing director of Britain's e-Jet International Ltd., which builds fuel systems for airports, says working through the Kurds might be "a low-risk way of getting into Iraq, commercially and securitywise." Others are less sanguine. Vincenzo Guarino, an executive of Power2Water, a Canadian water company, doubts Kurdish consumers would generate enough revenue to justify building a $20 million bottling plant. Many Kurdish workers earn only $50 to $100 a month.

Meanwhile, some local businessmen say the Kurdish areas are not immune from the cronyism and shakedowns that plague the rest of the Middle East. "There are lots of little Saddams," says one. "If [Kurdish chiefs] are so popular, why do they need so many armed men?" Be that as it may, the Kurdish areas still seem years ahead of the messy situation to the south. If the rest of the country's problems don't drag them down, the Kurds could play an important role in stabilizing Iraq.

By Stanley Reed in Arbil

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