Iraqi government forces, including Iraqi Special Forces and Iran-backed Shia Popular Mobilisation Unit (PMU) militias, recaptured Kirkuk and surrounding energy assets from the Kurdish Regional Government (KRG) on 16 October 2017.

• The Iraqi government's recapture of Kirkuk undermines Kurdish independence prospects, while its military operation is highly unlikely to expand further into core KRG territory. The Iraqi government operation encountered little resistance, particularly from Patriotic Union of Kurdistan (PUK)-affiliated Peshmerga, with only brief and localised fighting taking place. The Iraqi government forces lack the capability, and probably the will, to expand their operation into core Kurdish territories, where they would be likely to be met with popular resistance, not to mention US political pressure to desist. Meanwhile, the loss of the Kirkuk oil fields, accounting for up to 275,000 barrels per day of oil production, deals a severe blow to the landlocked Iraqi Kurdistan's economic independence and, by extension, its political independence aspirations. This is in line with the interests of Iran, whose Qods Force commander, General Qasem Suleimani, reportedly mediated a deal between Baghdad and the PUK, which saw the latter withdraw its Peshmerga from Kirkuk in the face of the Iraqi government operation.
• Oil flows out of Kirkuk are unlikely to be interrupted as a result of the province's recapture by the government, with a Turkish-imposed stoppage of the Kirkuk-Ceyhan pipeline now much less likely. As well as Kirkuk city, the government retook control of key energy assets, including the Bai Hassan, Avana Dome, Baba Gurgur, Jambur, and Khabbaz oil fields, as well as the North Oil Company and North Gas Company headquarters. Oil exports are unlikely to be interrupted as a result. Although the Kirkuk-Ceyhan pipeline passes through the KRG's territory, the latter would be highly unlikely to suspend oil flows, given its continued fiscal dependence on exports through the same pipeline. Similarly, now that the Kirkuk oil fields are under federal control, Turkey is even less likely to stop or reduce the flow of oil as a measure to pressure the KRG.
• The recapture of Kirkuk greatly improves Iraqi Prime Minister Haider al-Abadi's prospects in the April 2018 general election, at the expense of his pro-Iran rivals. The operation represents a major public relations coup for Abadi. The 2018 election will see him compete against pro-Iran hardline rivals surrounding former prime minister Nouri al-Maliki. It was during the Maliki's tenure, in 2014, that the Iraqi government lost control of Kirkuk province in the first place. The US's preference for the reformist and somewhat Western-leaning Abadi accounts for its decision to assume a neutral stance on the Kirkuk operation. The 2018 election is highly unlikely to materialise as a zero-sum contest, however, with the resulting government likely to incorporate both camps in as-of-yet unknown proportions.
• KRG President Masoud Barzani is now likely to be forced into striking a damage-limiting deal with the Iraqi government, while his ability to hold on to power will depend on the whether he can blame his rivals in the PUK. Baghdad is likely to remain ardently opposed to Kurdish independence, despite having recovered Kirkuk province from the KRG. With the bargaining leverage now tilted sharply in Baghdad's favour, Barzani is likely to seek a damage-limiting agreement to resolve the crisis. The negative impact this will have on his popularity will depend on the extent which he can credibly lay the blame on his rivals in the PUK: it was mainly PUK-affiliated Peshmerga that held Kirkuk, before retreating in the face of the Iraqi government advances. One option for Barzani will be to step down in favour of his nephew Nechirvan or son Masrour. Meanwhile, protests are likely in Kurdish cities, with the largest protests likely to take place in the PUK stronghold of Sulaymaniyah.

Indicators of changing risk environment

Increased risk

• An upsurge of unrest in Sulaymaniyah that undermines the PUK's authority in the city, providing grounds for PMU militias to take advantage of the KRG's disarray and push for land grabs in core Kurdish territories.
• Turkey joining the Iraqi government's economic blockade of Iraqi Kurdistan by closing the Habur border gate for more than a few days. This would raise the likelihood of the KRG escalating against Baghdad, probably along the new front line between Erbil and Kirkuk, with a view to forcing the US's hand to provide support for the KRG.

Reduced risk

• The resumption of salary payments by the federal government for government employees in Sulaymaniyah and Kirkuk, as well as the potential resumption of international flights to and from Sulaymaniyah, as a result of the likely deal which was struck between Baghdad and the PUK prior to the latter's decision to withdraw its Peshmerga forces from Kirkuk.
• The US pushes for a speedy resumption of a power-sharing mechanism in Kirkuk, which would require the withdrawal of the army and Shia militias from the city and the empowerment of the local security forces, lowering the risk of renewed spates of fighting in the city.
• Turkey chooses to keep KRG oil exports open. This would ensure continued KRG financing and save Barzani from a choice between capitulation to Baghdad, which would destroy his historical legacy, and military escalation.

Ege Seckin is an Analyst, Country Risk - Middle East and North Africa at IHS Markit
Posted 23 October 2017