Political Economy of State Formation in the Kurdistan Region of Iraq: Challenges and Opportunities

This chapter examines the Kurdistan Region of Iraq (KRI) as a case study, providing a critical analysis of the challenges involved in state-building within the context of conflict and natural resources. The study applies a political economy perspective to consider the impact of conflict and natural resources, specifically oil, on state formation in the Kurdistan Region of Iraq. While the activity of conflict and civil wars appear to be a natural and inevitable aspect of state-building in early and modern times, the projection of natural resources in KRI could potentially shape a sustainable political process leading to a level of self-governance. However, issues such as poor institutional quality, institutionalised corruption, mismanagement of natural resources and domestic conflicts over resource management have led the Kurdistan Region, like many rentier states, to rely heavily on resource revenue, resulting in the so-called ‘resource curse’. Consequently, the KRG has faced challenges in funding its economy, and thus oil-based state formation has not been successful, causing a weakening of the KRI’s reputation for being relatively secure, stable and prosperous. An alternative approach would be to establish a new economic model that emphasises economic diversification and economic governance and reinforces institutions.