The curse of oil in Iraqi Kurdistan

ERBIL, Iraq — Commander Amal Kirkuki swung open the large wooden doors to reveal a conference room. It was a war room, really. There was a long table and plush leather office chairs, maps with pins, a projector. A Chinese-made surveillance drone rested in the corner.

“I’m sorry you had to wait so long,” he said. “I was with the Americans.”

Kirkuki is a slender man, wearing traditional Kurdish clothing. He is unassuming in his mannerisms yet he holds one of the highest positions on this battlefield in northern Iraq. He is a top officer in the Kurdish military, known as the Peshmerga. The Peshmerga is an essential American ally in the ground war against ISIS.

His team is in charge of the city of Dibis and its surrounding villages. Dibis is just 80 miles southeast of Mosul. It is part of Kirkuk province and has been controlled by Kurdish forces since the Iraqi army’s northern divisions retreated in June 2014. This region is the epicenter of the war against the terrorist organization in part because it is the site of some of the largest reserves of oil in Iraqi Kurdistan. ISIS has used the oil it controls here to help finance its operations worldwide.

“Every movement we made was about protecting the oil”

 — Commander Amal Kirkuki

Kirkuki dimmed the lights. A large projector dropped from the ceiling, and with little introduction he began to run through the same presentation he gave to representatives of the US military just minutes earlier. The Peshmerga had received new intelligence — drone footage of ISIS fighters hiding out in a nearby house. A car drove across the screen, down a dirt road, and into a small driveway.

“This house is where about 20 soldiers are hiding. They’re going into that house now, but they won’t come out again,” Kirkuki said with a smirk.

He flipped through images taken in the area, pointing out ISIS safe houses and tunnels. Eventually, the projector went black and the commander turned on the lights. A large map hung on one of the walls. Blue and red thumbtacks marked different positions on the battlefield — red for ISIS and blue for the Peshmerga. The commander reviewed a series of recent battles, moving the blue and red dots to show how his men have succeeded against the terrorist group.

Describing one of the largest battles of 2015, he said, “Every movement we made was about protecting the oil.”

One of Kirkuki’s primary responsibilities is to direct the so-called oil and gas police, a division of the Peshmerga that is tasked with protecting petroleum resources around the region. Just as it did for the Americans earlier, the commander’s entire presentation centered around the protection of oil pipelines.

At one point during the meeting, a group of soldiers belonging to this specialized team entered the room, stomping their feet in salute. The men in the force are tall and fit. They are elite soldiers, and their mission is paramount. For the Iraqi Kurds, the oil here represents nothing short of their future security and prosperity.

“Our job is to protect the oil companies,” one of them later told GlobalPost Investigations as he hopped out of a jeep next to an oil field. It was night and the flames from the refinery illuminated the entire area. “Our economy depends on it.”

THE HISTORY

Kirkuki and his band of oil protectors are the result of an earlier calculation: that the abundant and mostly untapped oil reserves in northern Iraq could be the foundation of a prosperous and vibrant corner of an otherwise deeply insecure region. This was a strategy promoted by the United States and other world powers both before and after the invasion of Iraq in 2003.

But like so many other parts of the world that are home to deep stores of the valuable resource, the opposite came to be. Iraqi Kurdistan instead became mired in political infighting, otherworldly levels of corruption, and all-out conflict.

About 80 percent of Iraqi Kurdistan’s economy is dependent on oil revenue. Pipelines twist like arteries through villages all over the region. Most of them connect to a larger line that runs to the international market in Turkey. The feeder pipelines lie exposed to the naked eye, meandering in and out of desert patches, under bridges and around people’s homes. Their exposure makes them easy targets. And if one is attacked, production across the whole network can come to a halt, devastating cash flow to the region.

The Kurds rely on this oil not only to feed its people, but to secure its autonomy from a succession of politically hostile governments in Baghdad. The oil in places like Dibis and the larger Kirkuk Province represents the Kurdish dream of full independence from a central authority that at one point attempted to eradicate their ethnic group.

In the 1980s, Saddam Hussein launched attacks on the northern Kurds, who at the time were aligned with Iran. The Kurds — with contiguous populations in Iraq, Syria, Turkey and Iran — have long sought an independent state. In their fight with Saddam, thousands were killed in chemical-laced bombings. Millions more were displaced from their homes and forced into camps. The Iraqi strongman then paid Arabs to move in and take over those homes.

When the Americans ousted Saddam, the Kurds celebrated. They began to imagine a brighter future. When foreign energy companies began to move in to invest, the very real potential for economic independence took hold. It seemed like Iraqi Kurdistan might actually have a chance to succeed.

This all seems a long way off now. But hope remains. Kirkuki and his team see themselves as the defenders of it.

THE AMERICANS

Even if Kirkuki succeeds in his mission to secure the north’s oil reserves from the current threat of ISIS, another essential battle looms: the fight against government corruption. While this battle might be less violent, it will be a much bigger challenge.

Billions of foreign dollars have flowed into Iraqi Kurdistan since 2003. Yet the region today is in economic recession. The situation on the ground is so bad that some people have left their homes to seek refuge in camps where they can find reliable sources of food and water.

There is a lot of blame to go around for this state of affairs, not least the invasion of ISIS. But nothing has been more key to the failure than the growth of unchecked corruption. Corruption, both locally and internationally, has left the region — once touted by Kurdish President Masoud Barzani as a place that would become “a citadel of democracy and pluralism” — in tatters.

Like corruption everywhere, the problem starts at the top. And in Iraq, at the top is always the Americans. US officials helped facilitate corruption within the highest ranks of the Kurdish government. They also benefitted from it.

Almost immediately after the inauguration of US President George W. Bush, and at least two years before the televised dramatics of shock and awe, the Americans were eyeing the northern part of Iraq as a largely unexplored area that was prime for oil and gas exploitation. The Kurds, too, were desperate for the American investment. They saw it as an easy way out from under Baghdad’s grip.

“The people that were involved in setting up the oil sector here in the late 1990s were meeting regularly with the Americans and the British,” said Delshad Shaban, deputy head of the oil and gas committee in the Kurdish parliament. “They were all trying to figure out how to best bring in international oil companies to a region that lacked infrastructure and a formal process.”

A full year before the American invasion of Iraq, the State Department undertook a policy-development study called “The Future of Iraq Project.” The working group included Iraqi intellectuals and advisers who were in charge of developing policies for Iraq in the humanitarian, financial, oil and political sectors. One of those committees helped developed a protocol that was eventually introduced as a law. It transferred control of 81 percent of the undeveloped oil fields in Iraq to American and British oil companies.

The intersection of American corporate interests and the American-led occupation in 2003 raised endless ethical questions. But they were largely overshadowed in the media by political and military developments on the ground.

The depth of the American partnership with the Kurds is displayed prominently in documents published by Judicial Watch, a conservative nonprofit organization working to promote government transparency. The organization filed a Freedom of Information Act request with the Commerce Department in 2002 and in return received documents that contained a map of Iraqi oilfields, pipelines, refineries and terminals, as well as two charts detailing Iraqi oil and gas projects, and “Foreign Suitors for Iraqi Oilfield Contracts.” The documents showed the extent to which the Bush administration was tracking energy development in Iraq and how it was pursuing opportunities for American enterprises. 

It was one of the first widely distributed maps that showed how the oil and gas blocks in Iraqi Kurdistan were divided among international interests, including countries from Algeria to Italy to China. At the top of the map was the name of a group that had been working on Iraqi Kurdistan oil contracts and projects but was little known — the Bush-Cheney Energy Task Force. Made up of Bush administration officials, the task force spearheaded the beginning of the oil sector in Iraqi Kurdistan. Vice President Dick Cheney chaired the National Energy Policy Development Group, a smaller team within the task force.

Leaked cables from the State Department showed how the Americans were actively involved in the inner workings of the Kurdish government’s oil development, especially in oil-rich Kirkuk. The city held some of the biggest oil fields in the entire country, and the local elections were important to the development of international contracts.

In 2006, a newly appointed minister for natural resources in Iraqi Kurdistan named Ashti Hawrami quietly spent several weeks in Houston meeting with American officials.

He met Cheney, White House Chief of Staff James Baker, Gen. David Petraeus, US Congressmen Ed Royce, and executives at Halliburton, the company where Cheney previously served as CEO. According to a former regulatory enforcement officer with an American agency that oversees and investigates financial dealings, the meetings were fruitful. The investigator — who spoke to GlobalPost on the condition of anonymity because he is bound by a nondisclosure agreement — said the Americans gave Hawrami their blessing to try to expand the territorial boundaries of Iraqi Kurdistan into areas traditionally controlled by the central government in Iraq, and which held promise for oil reserves.

The UK similarly helped shape the oil sector in Iraqi Kurdistan.

Jonny Baxter, the head of the Department for International Development in Iraq from 2007 to 2008, later testified that the United Kingdom and the United States worked closely together on the ground, especially when it came to the country’s natural resources.
 
“Our top line really was to help Iraq unlock its own resources, to make use of its own resources and to effectively turn those into services for the Iraqi people,” he said during his testimony. “That involved helping the Iraqis have the sort of leadership capacity to achieve that. So at a sort of high level, that was what we were going in to do.”

The benefits from those natural resources, however, rarely reached average Iraqis.

“No one in this region offers assistance without expecting something in return. There is no such thing as altruism, personal gain is the underlying motivator.”

— Simon Hatfield, CEO of Western Zagros Limited

After the meeting in Houston, oil scouts — with the help and protection of US Special Forces — quickly began searching for unattended oil wells. According to an investigation by the US-based Securities and Exchange Commission (SEC), Hawrami put in place teams that fed information back to the United States regarding potential locations for companies to invest.

Many well-placed American officials benefited from the resulting energy contracts. None of these officials were found guilty of criminal charges. The SEC said several of them took plea bargains.

James Jeffrey, the former ambassador to Iraq who was deeply involved in negotiations with Kurdish officials over the development of oil fields in the region, now serves as an adviser to arguably the largest company in the region — Exxon Mobil. He is also a scholar at the Washington Institute for Near East Policy, a think tank based in Washington, DC. The CEO of Exxon Mobil, Rex Tillerson, has been nominated to serve as the next US Secretary of State.

Ali Khedery, an American who served as special assistant to five US ambassadors in Iraq, made a career out of his knowledge of the oil industry in Iraqi Kurdistan. He started his own consulting business and now advises Exxon. He drafted and implemented the corporation’s Iraq country strategy and he was the architect and chief political negotiator of the company’s billion-dollar entry into the Kurdistan Region.

Zalmay Khalilzad, the former US ambassador to the UN and former US ambassador in Baghdad, would later become a board member of RAK Petroleum — a major shareholder in DNO, a Norwegian energy company that once had significant stakes in the Kurdish region.

Peter Galbraith, a former US diplomat and staff member of the Senate Foreign Relations Committee, advised the Kurdish Regional Government during the drafting of the new Iraqi constitution from 2003 to 2005. He helped the Kurds manufacture language in the agreement that would allow them to keep future oil development under their control.

Simultaneously, Galbraith formed a company that signed a deal with DNO, that same Norwegian oil venture. Galbraith eventually admitted he had financial interests in Kurdish oil dealings at the time he was helping to craft the Iraqi constitution. But he told The Boston Globe that he saw no conflict of interest because he was working as a private citizen at the time.

“The business interest, including my investment into Kurdistan, was consistent with my political views,” he told the newspaper. “These were all things that I was promoting, and in fact, have brought considerable benefit to the people of Kurdistan, the Kurdistan oil industry, and also to shareholders.”

In reality, the people of Iraqi Kurdistan have not benefited from the oil industry at all.

More senior US officials, working with Hawrami in the Ministry of Natural Resources, benefited from their association with the Kurds for years. A string of high-profile American officials and military officers from the early days of the occupation in 2003 resurfaced in Iraqi Kurdistan’s oil industry in 2008, just before Bush’s second term ended.

Gen. Jay Garner was in 2003 the first director of the Office for Reconstruction and Humanitarian Assistance for Iraq — the office in charge of rebuilding the country after the invasion. Garner and his deputy, Col. Richard Nabb, in 2008 signed onto the board of directors for Vast Exploration, a small Alberta-based company. Vast Exploration secured a deal in Iraqi Kurdistan that same year and invested $100 million in oil rigs and other infrastructure.

Richard Perle, meanwhile, was chairman of the Defense Policy Board Advisory Committee from 2001 to 2003 under Bush. He sought, according to The Wall Street Journal, an oil field contract in Kurdistan in 2008 with a Turkish firm, AK Group International, in partnership with Houston-based Endeavour International.

Perle was after the Khurmala Dome, the northern section of the Kirkuk field that has been under the control of the Kurdistan Regional Government since 2007. It is one of the richest oil fields in the entire region. This story was first revealed in reporting by Seymour Hersh in The New Yorker in 2003. As a result, Perle resigned as chairman of the advisory committee.

Perhaps the most alarming investment by Americans in Iraqi Kurdistan during the war and occupation came from Texas oilman Ray Hunt. Hunt’s investment was unveiled during an infamous investigation in 2008 by Henry Waxman, then-chairman of the House Committee on Government Oversight and Reform.

Hunt was an important Bush campaign donor and a former Halliburton board member. He also served on Bush’s Foreign Intelligence Advisory Board. In 2007, he invested in a block in Iraqi Kurdistan, even though it was technically illegal to do so without permission from Baghdad. When news of the deal broke, the Bush administration claimed it had no idea that Hunt was planning the investment. But the Waxman inquiry revealed documents that contradicted the administration’s claims. Waxman wrote a letter to Secretary of State Condoleeza Rice about the documents:

“Five days after the announcement of the Hunt Oil contract, a State Department official contacted Hunt Oil to describe another ‘good opportunity for Hunt’ in Iraq, prompting a Hunt Oil official to write Ray Hunt: ‘This is really good for us … I find it a huge compliment that he is tipping us off about this …This is a lucky break.’”

But while so many US officials and diplomats gained financially, locals missed out. The money made in Iraqi Kurdistan’s oil industry never trickled down, largely because of the corruption of Kurdish officials, a reality well-known to the Americans working with them.

THE FAMILY BUSINESS AND THE ENGINEER

At the center of these contracts and negotiations was Hawrami, the man tasked with turning Iraqi Kurdistan’s newly tapped oil wealth into a mechanism for economic and political autonomy and prosperity. He would fail spectacularly at this task.

Estimates vary. But the losses to Iraqi Kurdistan due to corruption in the oil sector amount to many billions. Those dollars were supposed to fund all kinds of infrastructure, including schools and hospitals.

Luay al-Khatteeb, an expert on the Iraqi oil industry and a former adviser to the Iraqi government on energy policy, said he estimates that since 2008, the Kurdish government has mismanaged some $40 billion to $45 billion from oil and gas revenues.

“The question is what did they do with these revenues?” al-Khatteeb said.

The simple answer to that question is that the money went wherever the officials and families running the Kurdistan Regional Government chose to funnel it. And that usually meant it went to projects that enriched those individuals, always at the expense of the average Iraqi.

In Iraqi Kurdistan, family is everything. And there are two families that dominate politics here: The Barzanis and the Talabanis. Every government decision and business transaction is in some way conducted with the motivation of progressing the family’s legacy and prominence within society.

“The oil negotiations — it is a family business,” al-Khatteeb said.

“If it continues like this we are going to be in a dictatorship. The government is already doing some of the things like stealing money and taking the people’s rights away.” 

— Garmina Asi, a 32-year-old schoolteacher from a town near Erbil

The Barzanis developed a reputation as heroes — warriors who gave their lives on the battlefield for the Kurdish cause. Jalal Talabani, known in Iraqi Kurdistan as “Uncle Talabani,” was elected as the first non-Arab president of Iraq from 2005 to 2014. His son Qubad is now the deputy prime minister. Jalal’s other son, Bafel, works closely with the Kurdish Regional Government in Erbil, serving as a consultant for the Ministry of Natural Resources.

Both families own a number of large local companies and have close connections to powerful politicians and businesses in both the United Kingdom and the United States. All of the Talabanis, in fact, enjoy dual citizenship in the United Kingdom. The Barzanis, meanwhile, own property in both the United Kingdom and the United States. Masrour Barzani, the son of the president, owns a multi-million-dollar house in McLean, Virginia.

These two families, and their corresponding political parties, compete against one another for business deals, including deals in the energy industry. It is common knowledge here that every oil deal in Iraqi Kurdistan is tailored to benefit one of these two families.

The madness of this kind of misconduct is not lost on the average person here.

“All the politicians are fighting between land, money and power. If the [Kurdish] parties cannot make agreements with each other, how are we supposed to move forward?” Garmina Asi, a 32-year-old schoolteacher from a town near Erbil, said in a recent interview. “If it continues like this we are going to be in a dictatorship. The government is already doing some of the things like stealing money and taking the people’s rights away.”

The Barzani family was the first to bring Hawrami on board at The Ministry of Natural Resources, in 2006. And what a ride it has been. Hawrami had the experience. He had worked not only as an engineer, but also as a proprietor and director of a UK engineering and services firm. He also worked as a consultant with Gulf Keystone Petroleum. He helped list the company on the London markets in 2004.

Hawrami immediately set out to expand the borders of Iraqi Kurdistan by signing international corporations onto oil contracts. His meetings in the United States helped with that. But it was also his relationship with Adnan Sammaria, the executive at Gulf Keystone Petroleum. Sammaria knew the inner workings of Iraq’s central oil authority. He was a former employee of the central government’s Iraq Petroleum Company, working as a geologist. He knew where the oil could be found. That information helped Hawrami move companies into the region on plots of land that had been discovered by the central government but never claimed by international companies. Samarria eventually became the Gulf Keystone country manager for the Iraqi Kurdistan region.

Hawrami was, and largely still is, the only official in the Kurdish government who knew how oil contracts worked. He led all of the negotiations. Hawrami single handedly decided the terms of each contract and would email them to companies. According to Shaban from the oil and gas committee in the Kurdish parliament, Hawrami was many times the sole negotiator, which meant that few others knew of the financial status of the ministry or the terms of the contracts.

“I remember there was a time about 10 years back when he was in Washington and we had wrapped up our event. He had to catch a flight and he walked out of the main room, leaving behind his Samsonite briefcase,” al-Khatteeb said. “I said, ‘Mr. Ashti, you have forgotten your ministry.’ It really was a one show ministry.”

“The [Kurdish government’s] own financial ministry had no clue what the status of oil and gas in the region was,” he added.

GlobalPost Investigations attempted multiple times to interview Hawrami, to no avail. One scheduled interview was scuttled at the very last minute. 

“The minister has reconsidered your request,” said a man named Omed, who appeared to be an office manager. He would not provide his last name. “I know you think this story is important. But it will have no impact on us.”

SOME PEOPLE GET RICH

The former regulatory official outlined for GlobalPost Investigations just how blatant and destructive corruption at the oil ministry has been.

He said that so-called capacity-building bonuses — undefined bonuses at the end of oil contracts — and local building bonuses were all “glorified kickbacks” that went directly into the offshore accounts of Barzani and Talabani family members. Those bonuses were in the majority of contracts in Iraqi Kurdistan, he said.

Here’s one example: Western Zagros Limited, a company based in Canada, paid the government of Iraqi Kurdistan $40 million in capacity building bonuses, the contract between the company and the Kurdish Regional Government shows. Western Zagros paid the government one payment of $5 million within 30 days of the start of the contract. Each payment after went to the government at the rate of $2.5 million every month over a period of 14 months. Western Zagros paid that capacity-building bonus twice.

“No one in this region offers assistance without expecting something in return,” said Simon Hatfield, the CEO of Western Zagros Limited, in testimony during a London arbitration. “There is no such thing as altruism, personal gain is the underlying motivator.”

“We should have oil contracts that benefit all the Kurdish people, not powerful individuals” 

— Delshad Shaban, deputy head of the oil and gas committee in the Kurdish parliament

These bonuses that were paid to the government were often not revealed to the public, and they were certainly not passed on to any public institutions.

“The ministry only began posting its contracts on its website in the past 18 months,” al-Khatteeb said. “Most of these reports, though, are very much half-baked and half-prepared.”

In one classic example that might be taken from a bad Hollywood script, emails between Hawrami and a top executive at one of the most reputable companies in Iraq — an oil and gas company based in the United Arab Emirates — revealed that the company sent the Ministry of Natural Resources 12 armored sports utility vehicles a week before their contract went into effect.

Mearsk sent shipping documents to Hawrami detailing the cars that would be sent to the ministry, along with instructions regarding how the cars would reach Iraqi Kurdistan. The company sent the cars in shipping containers through the Turkish border as requested by the Ministry of Natural Resources and Nerchevin Barzani, who was then prime minister of Iraqi Kurdistan.

Kickbacks are only one way to amass private wealth. Insider trading is another.

Hawrami, of course, had detailed knowledge about which companies were thinking of selling shares, which ones were not doing well financially, and which oil fields were producing the most, or the least, oil. He used that knowledge to his own benefit and traded shares himself with bankers at HSBC and JP Morgan, according to emails obtained by the SEC and shared with GlobalPost Investigations.

At one point, Hawrami traded shares after a tip that one large oil company in Iraqi Kurdistan was about to be taken over by another.

The Financial Services Authority, the regulatory body of the London Stock Exchange, investigated Hawrami in 2008 for allegedly trading shares in Heritage Oil after he personally awarded the company an exploration contract. Hawrami claimed that the transactions were authorized and that the profits were transferred to the government. But the SEC says millions went missing in the trade.

In October 2008 the Norwegian bourse investigated DNO, the Norwegian oil company operating in Iraqi Kurdistan, for insider trading. DNO sold 43 million shares to an unknown client for almost $30 million. The buyer turned out to be Turkey’s Genel Energy. Hawrami served as the middleman. DNO was suspended from working in the region. Hawrami was never punished.

“We should have oil contracts that benefit all the Kurdish people, not powerful individuals,” Shaban said.

TRICKLE-DOWN CORRUPTION

The corruption among top Kurdish officials has trickled down to lower-level government employees, as well as the general population. In fact, small-scale graft has become such a staple of daily life here that few even recognize it as wrong. It’s simply what’s required.

On almost every government level, and within some parts of the private sector, people are desperate to get ahead, even if that means dealing in counterfeit money, prescribing unnecessary drugs to patients, or accepting handouts from international oil companies. Even some of the most public fighters against government corruption in Iraqi Kurdistan are pulled into the depths of government fraud.

Shaban said that most people think corruption is necessary.

“I remember that Prime Minister Barzani had come to one of our meetings and told us, ‘There may have been corruption in the past in the oil industry here. But if you look at what happened, we had to do it. We needed to protect Kurdistan,’” he said.

This thinking is widespread, even among those who claim to be fighting corruption.

Sherko Jawdat is a lawmaker in Iraqi Kurdistan. He once was held up as someone willing to take on corrupt officials. For months this year he lived in seclusion near the Iran border, his reputation tarnished. Jawdat was passing proprietary information, often gained from private meetings with government officials, onto an oil conglomerate.

The company, called Crescent Petroleum, was suing the Ministry of Natural Resources for $11 billion in overdue payments. Jawdat was feeding them information to help their case. In exchange, he asked them to employ a family member.

Local journalists exposed Jawdat and in the course of just a few months, his reputation as an advocate for governmental reform and a prosecutor of corruption vanished. In the public eye he had become the same kind of official he had formerly denounced. Then, things got worse for Jawdat. In June, the Ministry of Natural Resources sued him for falsely alleging that the ministry had stolen oil revenue.

“Everyone knows this. It is not a secret,” he told GlobalPost Investigations from his home in Sulaymaniyah. “The department is not checked or verified by any independent institution. You can’t make right decisions if the information can’t be verified and checked professionally.”

Jawdat has made a few press statements in recent months but it is unclear how his relationship with the Ministry of Natural Resources has evolved.

Corruption is now pervasive in all sectors of the country. At a hospital in Erbil, patients pay bribes to nurses to let them into the emergency room or facilitate faster treatment. At the airport, “lost” luggage is returned only after paying a bribe to airport employees.

In another example, the government pays families who have lost loved ones in the battle against ISIS. Some families make false claims to try and collect.

“There is no one really tracking this,” said Mohammed Goran, a Kurdish economist and advisor to the finance ministry. “So they can get away with it.”

THE REPERCUSSIONS

For a few years, this corruption failed to upset the local economy to the degree that anyone took notice.

Between 2007 and 2010, the GDP in Iraqi Kurdistan actually grew by almost 7 percent, Goran said. Foreign direct investment grew in the real estate and tourism sectors, and the oil and gas sectors boomed.

“Our identity became oil,” Goran said. “But the development of the oil sector was just too fast and we couldn’t keep up. We couldn’t keep track of all the money coming in. Now we are seeing the consequences.”

In the summer of 2014, when the war against ISIS began, the Kurdish military gained control of oil wells in the hotly contested city of Kirkuk and began exporting that oil throughout the region without permission from Baghdad, reaping the benefits of the trade for themselves. It was the kind of strategy that the Americans gave their blessing to a decade earlier. In response, Baghdad stopped sending the Kurdish Regional Government the required 17 percent of its federal budget, which the Kurds are entitled to according to the Iraqi constitution.

Since then, the price of oil plummeted, dropping at one point to $24 a barrel. The rate of economic growth slipped to 2.5 percent by 2015. The unemployment rate in Iraqi Kurdistan is now more than 14 percent.

Without the cash inflow from the central government in Baghdad, the Kurdish government lost money. While Iraqi Kurdistan’s top families and loyal officials continue to enrich themselves, civil servants haven’t been paid in months, forcing many of them to leave or find second jobs.

The dichotomy between those who have capitalized on Iraqi Kurdistan’s oil and those who haven’t can be seen in even the physical layout of Erbil, the region’s capital.

Twenty miles north of Erbil, near the international airport, 50-story apartment buildings, adorned with crystal chandeliers, tower over the garbage collectors who pick up the trash in the luxury complexes each day. The apartments house international oil traders and contractors, as well as government employees closely linked to the region’s oil market. Next to the apartment complex sits the Divan Hotel — a lavish building that houses international traders and businessmen. It costs more than $300 a night to stay there. Behind the building is a makeshift refugee camp that houses 30 Yazidi families, who say that food assistance is inconsistent.

Down the street, children fight for seats in overcrowded classrooms. Their teaching staff has been cut. People line up for blocks at local ATMs because they know the machines will only be stocked for a few days. Men squat and wait along one of the city’s main roads, hoping a construction company might stop to hire them for a day’s work.

Next to the citadel downtown, gold merchants sit slumped over their glass cabinets holding dozens of necklaces, earrings and bracelets. “It’s been slow here for about a year,” one merchant said, nervously rearranging the gold jewelry on his felt trays. “I would say that in our store here — our profits are down about 20 percent.”

The consequences of corruption in the oil industry and the corresponding economic collapse can be seen perhaps most notably in the country’s government-run hospitals.

Dr. Shakhawan Diyazee is the manager of Erbil’s largest hospital. Coming from a wealthy family, he uses what’s left of his inheritance to live in Royal City, the lavish apartment complex across from the Divan, and send his daughter to a prestigious high school near the border with Iran. She will attend university in London, he said.

At his office in Rizgary Hospital in downtown Erbil, Diyazee sits in a leather chair at his desk. He is dressed in a button-down shirt and shoes he said he bought in London. Kicking his feet up, he snaps open a lighter and starts puffing on a cigarette. “Don’t tell anyone,” he said. “We aren’t supposed to smoke in here.”

“You see,” he said, exhaling. “I come from a rich family. So, for me, this crisis doesn’t really affect me. If I could go back and change things, though, I wouldn’t be a doctor here. But I am too old to start a new life now. My daughter is still young. She has a chance at a better future.”

Diyazee explained how the downfall of the local economy has impacted the hospital. He has just $13,000 to spend per month on maintenance and upkeep. “The other month our elevator broke — the one that goes to the operating floor. And I had no money to fix it,” he said, adding that there is just one machine to perform radiology in all of Iraqi Kurdistan. “There’s not enough money to run this hospital.”

Diyazee oversees 1,700 employees. Most of them, he said, work two or three jobs. Sometimes, they don’t show up because they make more money in their other professions. “My job here requires that I discipline them, that I yell at them,” the doctor said. “I don’t feel like I can. I can’t blame them for wanting to make money. But at the same time, it makes my job really hard.”

High-level doctors at Rizgary Hospital like Diyazee make just $500 a month. During better times, they had made close to $2,500 a month. Doctors below him in rank make even less — about $200 a month.

Thousands of doctors have left Erbil since 2014 and are now practicing in Europe, Diyazee said. Those who haven’t leave their public jobs at 1 p.m. and go to their more lucrative private clinics, where they work until about 9 p.m. Others work as taxi drivers or policemen.

As a result, patients are suffering. Diyazee said the one radiotherapy machine in the region is out of service, with no money to fix it. The waiting list to use the machine is now a month long.

Rizgary is the largest public hospital in Erbil, but its walls are crumbling. In some wings, walls have gaping holes. The emergency room on the first floor is overflowing with patients. Dozens sit in the hallway, eating bits of bread and dates, waiting for a turn to talk to a doctor or nurse. Because of the lack of available specialists, the emergency room here acts as a filter for all non-surgical patients. It also has one of the only blood laboratories in the city.

By the early afternoon, the operating floor in Rizgary Hospital is silent. All the doctors have left for their other jobs. A pile of dirty scrubs lies on the floor. Bloodied clogs line the hallway outside the operating theater.

“Sometimes I think I should just move to London and stay there. It has more opportunity. But my extended family needs me here. They need my support.”

REPEATING HISTORY

The crisis engulfing Iraqi Kurdistan is not unique. The people of Iraqi Kurdistan join millions of others in dozens of countries across the world who have had their rights to natural resources stripped away by international oil companies and corrupt local governments. These people are victims of what is known as the “resource curse” — a term used to describe the failure of resource-rich countries to benefit from their natural wealth, as American businessman George Soros once put it.

Jenik Radon, a professor who researches the energy industry at Columbia’s School of International and Public Affairs, said the negotiation process in oil and gas deals sits at the epicenter of the resource curse. That’s the space occupied by Hawrami and his predecessors.

In his book, “Escaping the Resource Curse,” Radon writes that in almost every country, the mention of oil discovery ignites a national dream of riches that often affects the way the negotiations are conducted. In their haste to capitalize, government officials often cut deals that benefit oil companies in the long run, but not the country. In Iraqi Kurdistan, before the arrival of Hawrami, the anxious government allowed oil companies huge tax breaks and freed them of hindering oversight.

Corruption, of course, is also a major contributor to the oil curse. Take Nigeria as an example. Nigeria is one of the largest oil producers in Africa and the 10th largest producer of crude oil in the world. Like Iraqi Kurdistan, oil in Nigeria makes up a large portion of its economy. Nigeria, at one point in the 1970s, was one of the world’s top 50 richest countries. Now it is one of the world’s 25 poorest.

Much of what contributed to Nigeria’s downfall was due to corruption in the government and lack of transparency in oil contract negotiations. Hundreds of thousands of barrels of oil a day are sold on the black market and profits of those sales find their way back into the pockets of Nigerian officials.

The resulting poverty and disenfranchisement among civil society has led to rebellions, and has given terrorist organizations ample opportunity to gain a foothold inside the country.

The resource curse has struck countries all over the world, including Angola, Chad, Venezuela, Libya, Equatorial Guinea, Botswana, Peru, Chile, and others. And now: Iraqi Kurdistan.

THE FUTURE

Today in Iraqi Kurdistan, the battle against ISIS continues. Thousands of displaced Kurds flee to camps each day. The price of oil, while recovering slightly, is still only about $50 a barrel. Baghdad has yet to give the Kurds their fair share of the national budget.

Even the most optimistic are struggling to see a path in the near future to any economic independence.

“When the Americans came to Iraq they told us we would be living in castles with all the oil investment that would be coming in. They didn’t tell us we would be living like this”

— Ahmed Qussai is a 42-year-old former oil worker

“The Kurdistan Regional Government needs more than $1 billion per month to fit its needs,” said Fazil Nabi, the deputy minister of finance in Iraqi Kurdistan. “We are operating with only 40 percent of the funds we used to have before the war with ISIS started. Now, our priority is to get the salaries back into the hands of the people.”

The oil industry, once the harbinger of good things to come, is collapsing. Some blocks are already drying up and international oil companies — concerned with corruption and security — are leaving. In 2015, the UK-listed Afren company said its Barda Rash field held no more reserves. Petroceltic International, an Irish company, and America’s Hess Corporation both pulled out of the Dinarta contract. Chevron pulled out of the Rovi block without finishing its exploration.

Top executives at some of these companies said they also pulled out of Iraqi Kurdistan because the Ministry of Natural Resources manipulated their contracts in a way that forced them to leave.

The larger corporations that could withstand the fall in oil prices were awarded those blocks. Now, though, even these companies are having difficulty withstanding the economic costs of staying in Iraqi Kurdistan, not least because of complications they must face when dealing with the Ministry of Natural Resources, according to al-Khateeb.

In its 2015 annual statement, Gulf Keystone Petroleum warned that in conjunction with the low price of oil, nonpayments from the Kurdish government “create a material uncertainty that casts significant doubt upon the group’s ability to continue as a going concern.”

Even Gulf Keystone Petroleum, the oil company that was such a key partner for Hawrami in the early days, is frustrated by the government’s lack of production payments. After the government missed several payments in a row, board members of Gulf Keystone had to decide whether to press on with arbitration, as others had done, or to strike a backdoor deal and restructure the debt. The board chose the latter. At the beginning of December, Gulf Keystone received $15 million for sales in September but is still awaiting numerous payments.

Dana Gas, owned by Crescent Group, won a $2 billion dollar lawsuit against the KRG in London earlier this year for nonpayments.

The Ministry of Natural Resources has hired Deloitte — an international consulting firm — to do an internal audit with the purpose of examining how much money has been lost or unaccounted for since 2004. It’s a positive sign. But that process has yet to begin.

Meanwhile, Iraqi Kurds are suffering. And their anger is growing.

Ahmed Qussai is a 42-year-old former oil worker. He now lives with his family in a refugee camp near the city of Makhmur. He said his entire adult life has been about oil. He is angry at ISIS for all the destruction they have caused, but also at the government for failing to follow through on promises to share oil riches with the general population. He said political factions have done little to ensure that people get access to some of the benefits of the oil industry here.

“The government just took the oil and didn’t work with the local people,” he said.

“When the Americans came to Iraq they told us we would be living in castles with all the oil investment that would be coming in,” he said, redirecting his gaze toward his children washing their feet with a hose in the corner. “They didn’t tell us we would be living like this.”