“The front line against ISIS is in danger,” Talabani told an audience today in a discussion co-hosted by the U.S. Institute of Peace and the Woodrow Wilson International Center for Scholars. “The existential threat to Kurdistan today is not a war with ISIS. It’s not the stress of housing all these displaced people and refugees. It’s not even the political turmoil facing the country and the Kurdistan region. The number one threat facing Kurdistan today … is the state of our economy.”

“ISIS did not just fill a military vacuum in Iraq. ISIS filled a political vacuum.” – Kurdish Regional Deputy Prime Minister Qubad Talabani

Talabani is in Washington appealing for financial support to help his regional government weather a series of shocks in recent years that have shaken the foundations of an area that was thriving economically in the aftermath of the U.S. invasion that toppled Saddam Hussein. Since 2012, the Iraqi Kurdistan has sheltered some 275,000 refugees from the war in Syria. In 2014, another influx of people fleeing violent conflict came from other parts of Iraq that were captured by the Islamic State group, also known as ISIS. The same year brought the sudden global collapse of oil prices, which constituted the vast majority of the region’s – and Iraq’s – revenue. And the Iraqi government of then-Prime Minister Nouri al-Maliki in Baghdad began withholding budget funding that normally flowed to the Kurdish region in an escalating dispute over oil revenue.

“This [economic] threat facing Kurdistan is great,” Talabani said. “This threat facing Kurdistan is real. And without immediate direct support, the experiment of Kurdistan is in danger.”

The regional government’s Peshmerga military units have been pivotal allies for the U.S.-led international coalition trying to turn back 2014’s shocking advances by the Islamic State group across northern Syria and Iraq. The U.S. and its partners in the fight have been laying groundwork to recapture Mosul, perhaps later this year, a far more complex operation than the liberation of Tikrit a year ago and Ramadi more recently. A destabilized Iraqi Kurdistan could reverberate not only throughout Iraq but also in neighboring countries such as Turkey and Iran, he said.

USIP has been working in Iraq for more than a decade, with a permanent office in Bagdad since 2004 and another in Erbil since 2015. The institute’s work with individual and organizational partners on the ground includes facilitating local-level dialogues among adversaries to prevent further violence, especially in places recaptured from ISIS. One dialogue a year ago resulted in an agreement to avert collective retribution against Sunnis over a 2014 massacre of mostly Shia cadets at a military base called Camp Speicher near Tikrit. About 400 families returned to the liberated area initially, and the Wall Street Journal recently reported that almost all residents had come back.

“The Kurdistan region, which has long been an island of stability in the Middle East, is now affected by this conflict and it faces significant economic and political roadblocks that threaten that important stability,” USIP President Nancy Lindborg told the audience in introducing Talabani, with whom she met during a visit to Iraq in September 2015. “When I was in Erbil, I was very struck by the fact that 1 in 5 people in the Kurdistan region is displaced.”

Kurdish Genocide Anniversary

Speaking on the anniversary of the 1988 “Anfal” genocide perpetrated against Iraqi Kurds under Saddam Hussein, Talabani noted the devastation of Iraq’s Yezidis and other religious minorities in the face of the ISIS onslaught in 2014.

He urged the U.S. military coalition to plan carefully for the liberation of Mosul to ensure that all parties are clear about their roles and the steps to be taken and to safeguard against surprises. As important is the aftermath. A plan must be developed, he said, to secure an inclusive political and social structure for that multi-ethnic area that will be sustainable and forestall a return of ISIS or another variation of violent extremism in the same way that this virulent force grew out of previous iterations such as al-Qaida in Iraq.

“Mosul must not be just a military operation,” Talabani said. “There needs to be a comprehensive plan for Mosul the day after – the governance of Mosul, the politics of Mosul.”

The same goes for Iraq overall after ISIS is sidelined, he said, adding that he doesn’t see the kind of discussion that needs to take place about how to sustain “a degree of harmony between the various components in Iraq.”

“ISIS did not just fill a military vacuum in Iraq,” Talabani said. “ISIS filled a political vacuum. So … we have to face the politics of Iraq too.”

The Kurdish region is struggling with its own political divisions. The term of President Masoud Barzani, which already had been extended by the region’s parliament, expired last August, and political leaders have been unable to agree on a way to replace him. And Iraq’s parliament in Baghdad has deteriorated into physical brawls in recent days, including between Shia and Kurdish representatives. But Talabani played down the risk to Kurdish-Shia relations.

“I don’t think a little scrap in parliament is going to bring an end to the Shiite-Kurdish coalition,” he said. He also said he could foresee a closer alignment of Kurds with Sunnis as the latter vie for greater autonomy from the central government. Iraq’s federal structure should have room for that as a potential solution, he said.

Referendum on Independence

Talabani, who formerly served as the KRG’s representative in Washington, sought to reassure the audience about renewed talk in the Kurdish region that it might conduct a referendum on independence before the end of this year. He said it wouldn’t distract from the Kurdistan region’s fight against ISIS and its efforts toward economic and political reforms. In an appearance a year ago at the Atlantic Council, also co-hosted with USIP, Barzani said the ongoing fight against ISIS had delayed any such referendum.

“The growing talk of independence shouldn’t worry our friends in the United States,” he said. While there is “absolutely no doubt of the natural right of the Kurds to be independent” because of the persecution they’ve faced historically, “there is still a lot to do before we can go through all the elements of this process that are required to hold a referendum and then the what-ifs that come after a referendum.”

For now, the priority is the fight against ISIS and the struggle to get the region’s finances into shape, he said. Officials have cut spending, including salaries, reducing a deficit of $400 million a month down to $100 million, and taken steps to privatize functions such as electricity distribution. Still, there is “a very big hole to plug” and a severe risk that the three-month delay in salaries for the very soldiers fighting ISIS will undermine the strength of the front. About 60 percent of the region’s population is dependent on the public payroll, according to the Economist. Citizens have protested in the cities of Erbil and Sulaymaniyah and in smaller towns since the KRG announced in January that it would cut high wages by 75 percent and lower salaries by 15 percent, the magazine reported.

Talabani said he is seeking a portion of U.S. defense funding for the military fight against ISIS, and negotiating with International Monetary Fund, which is holding its annual spring meeting in Washington this week, to ensure that part of any financial aid for Iraq makes its way to the Kurdish region as well.