Kurds’ isolation deepens as Iraq severs banking links

Bloomberg

Iraqi authorities halted key financial transactions with the country’s Kurdish region, deepening its isolation after last week’s overwhelming vote in favor of independence.
The central bank banned lenders with headquarters in the northern Kurdistan region from taking part in dollar auctions, according to a central bank official who asked not to be named. Banks based in Baghdad are also forbidden from dealing with their Kurdistan branches, the official said.
Kurdish leaders pressed ahead with the September 25 referendum despite warnings and threats both from Iraqi officials and neighbors of the land-locked and already semi-autonomous zone. After more than 90 percent of voters backed secession, the pressure on the Kurdistan Regional Government has escalated.
Iran and Turkey oppose the move towards statehood, which they see as a precedent that could encourage Kurdish separatists in their own countries. The US has argued it would add to instability at a crucial point in the fight against IS. For Iraq, control of strategic oil assets around the city of Kirkuk are at stake.
The Turkish government has threatened to shut the Habur border crossing and to end the Kurds’ oil exports through the Mediterranean port of Ceyhan. President Recep Tayyip Erdogan also warned of possible military action, likening the referendum to a “dagger thrust into the heart of the region.”
Iran has banned fuel trade with the Kurds, and international flights to the region have been suspended after Iraq closed Kurdish airspace. Erdogan arrived in Tehran for talks on Wednesday.
“This is a blockade. It will have a detrimental impact on the economy of Kurdistan, which is already suffering,” said Sami Nader, head of the Levant Institute for Strategic Affairs in Beirut.
The biggest dispute is over oil. The Kurdish government has struck deals with producers and collected the revenue, angering the administration of PM Haider al-Abadi, which claims authority over crude sales and has partially withheld budget payments for the region.