Luay Al Khatteeb and Ahmed Mehdi write: The federal government in Baghdad believes the Kurds have been playing a double game by demanding their share of federal oil revenues while also signing a string of independent contracts with international oil companies and midsize wildcatters and then pocketing the oil export profits after bypassing Baghdad.

In the past, Iraq and the Kurds have always come back to the negotiating table. This time could be different.

Despite Mr. Barzani’s calls for an independence referendum, K.R.G. officials are still counting on Baghdad to send them money. However, this double strategy is precarious — and the threat doesn’t come from Baghdad, but from Basra in the south.

There is a real risk that Iraq’s southern Shiite provinces — which produce over 90 percent of Iraq’s oil — could copy the Kurds in their call for autonomy. Basra’s political elites do not see why a share of their oil profits should go to the K.R.G. government in Erbil if those funds are only helping to subsidize Kurdish independence ambitions.

The Kurds face a hard choice: either they become part of a viable federal oil revenue sharing system or go their own way. And for the K.R.G., losing revenues from the central government would be irreversible and disastrous. That’s because an independent Kurdistan would make less than $7 billion per year — almost a third less than they received when given just 12 percent of Iraq’s total oil revenues. [Continue reading…]